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...

It is widely agreed that a fiscal rule should boost discipline and credibility, reduce macroeconomic volatility, and be easily understood. To support such goals, a government may run structural surpluses and accumulate a precautionary cushion of assets on behalf of agents who do not enjoy access...