Fiscal policy considerations in a low-interest-rate environment

Several questions must be considered b efore concluding that low interest rates make it possible to conduct a highly expansionary fiscal policy : Why are interest rates so low? Are they going to remain low for a long time? Interest rates may be low for structural reasons (excess savings) or because the absence of inflation keeps monetary policy expansionary. For proponents of modern monetary theory (MMT), central banks have commit ted to not letting interest rates rise. If the conclusion is that interest rates are going to remain low for a long time, the cost of public money will then be lower for a long time and governments can lower their discount rates and carry out more investment. The question here concerns the ability of governments to select efficient projects and to measure return s on public spending. Moreover, if interest rates remain very low for a long time, it is important to consider the drawbacks of this situation, which could potentially lead central banks to raise interest rates even in the absence of inflation: weakening of banks, asset price bubbles, zombie firms, capital outflows, etc.