01843cas a2200265 a 4500 AALejournalIMF019267 230101c9999 xx r poo 0 0eng d 5.00 USD 9781498311151 1018-5941 BD-DhAAL BD-DhAAL Bi, Huixin. Fiscal Implications of Interest Rate Normalization in the United States / Huixin Bi, Wenyi Shen, Shu-Chun Susan Yang. Washington, D.C. : International Monetary Fund, 2019. 1 online resource (45 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper studies the main channels through which interest rate normalization has fiscal implications in the United States. While unexpected inflation reduces the real value of government liabilities, a rising policy rate increases government financing needs because of higher interest payments and lower real bond prices. After an initial decline, the real government debt burden rises even with higher tax revenues in an expansion. Given the current net debt-to-GDP ratio at around 80 percent, interest rate normalization leads to a negligible increase in the sovereign default risk of the U.S. federal government, despite a much higher federal debt-to-GDP ratio than the post-war historical average. Mode of access: Internet Shen, Wenyi. Susan Yang, Shu-Chun. IMF Working Papers; Working Paper ; No. 2019/090 Full text available on IMF http://elibrary.imf.org/view/journals/001/2019/090/001.2019.issue-090-en.xml IMF e-Library