The trilemma for low interest rate macroeconomics

Abstract Three desirable goals of macroeconomic policy are: full employment, low inflation, and a low debt level with no Ponzi scheme. This paper shows that, when the natural real interest rate is persistently depressed, at most two of these three goals can be simultaneously achieved. Depending on the parameters of the economy, each of these three possibilities can be the preferred option, resulting in a non-trivial policy trilemma.