has made it easier to pursue an expansionary fiscal policy. this is partly because the interest costs for government loans are very low. i mentioned earlier that an expansionary monetary policy lowers government interest costs. however, the biggest effect on interest costs comes from this trend decline in real interest rates. importantly, it is also this factor that has driven central banks ’ policy rates downwards. another key effect of the low interest rate, which also speaks in favour of fiscal policy, is that more public investments will become profitable. a renewed discussion of the possibilities of fiscal policy in recent years, the low interest rate has given rise to a renewed discussion of fiscal policy in the research community. the reason for this is the observation that the interest rate is lower than growth in the economy. 13 when the government can borrow at a very low interest rate, the debt burden as a share of gdp does not need to increase, provided the economy grows at a sufficient pace. in other words, public finances can show a deficit for a period without it being necessary to raise taxes to address this. growth is enough to ensure that the debt ratio improves without any tightening. it is not only the relationship between the interest rate and economic growth that is important in this context, but also the level of interest rates as such. in several developed economies, long - term interest rates are now close to zero or are even negative, or have recently been so. this means that private actors are willing to lend long - term to the state without any significant compensation, or are even willing to pay to lend. this can, without exaggerating, be described as a pretty generous offer. it is not very difficult to imagine that it is possible to find areas in which public investment may be needed and where the funds borrowed to implement that investment may well have a positive return because the cost is very low or negative. why this has not happened to a greater extent than has been the case is not entirely easy to understand. one probable explanation is that many countries have put in place rules to prevent or counteract increased borrowing. the reasons for 13 see, for example, blanchard ( 2019 ), who also notes – possibly somewhat surprisingly – that the tendency for growth to exceed the risk - free interest rate is not a new phenomenon. a summary of the changed view of the role of fiscal policy is available in lagerwall ( 2019 ). 8 this are good if we look at past negative experiences. however, if this is the explanation, it is natural

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