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The Tell: An overlooked ‘natural stimulus’ could help save Italy

Investors and economists are spending a lot of time chewing over the inadequacies of quantitative easing, negative interest rates and monetary policy in general, when it comes to jump starting growth.

And while much of the recent focus has turned to prospects for “helicopter money”—the direct financing of fiscal stimulus by central-bank money printing—there is an often overlooked benefit of ultraloose monetary policy that also has fiscal-stimulus implications.

“Seldom included in the discussion on fiscal policy is the ‘natural’ stimulus that occurs when high-coupon debt is replaced with lower-coupon debt. This frees up fiscal resources that can be spent on other things,” wrote analysts at Montreal-based Pavilion, in a Thursday note.

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