The microeconomic costs of fiscal stability
To prevent public debt crises, central banks in OECD countries are keeping interest rates far lower than the growth rate (there is "financial repression"). But the cost of preventing a sovereign debt crisis must be held up against the microeconomic costs of abnormally low interest rates: Taxing savers either discourages saving or leads to an abnormally high savings rate s (if income effects outweigh saving behaviours); If interest rates are very low, investors are encouraged to carry out inefficient investments (too much money is invested in real estate, infrastructure, assets that are too risky, etc.) and to move savings excessively to countries with "normal" interest rates; They keep companies that ought to disappear ("zombie companies") artificially alive; They do not give governments any incentive to stabilise public debt ratios.