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A Nominal Theory of the Nominal Rate of Interest and the Price Level: Some Empirical Evidence

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  • Tito B.S. Moreira

    ()
    (Catholic University of Brasilia)

  • Geraldo Silva Souza

    ()
    (University of Brasilia)

Abstract

This paper aims to investigate the impact of the bond/money ratio on the nominal interest rate. The econometric model chosen fits a dynamic panel data for Canada, Japan and US over the period 1980-2006. We found empirical evidence that Ricardian Equivalence does not hold. The analysis indicates, for the three countries, that the bond/money ratio affects the nominal interest rate.

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File URL: http://www.accessecon.com/Pubs/EB/2009/Volume29/EB-09-V29-I4-P301.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 29 (2009)
Issue (Month): 4 ()
Pages: 3120-3125

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Handle: RePEc:ebl:ecbull:eb-09-00402

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Related research

Keywords: Government debt; Ricardian equivalence; bond/money ratio.;

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References

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  1. R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
  2. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
  3. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
  4. Evans, Paul, 1987. "Interest Rates and Expected Future Budget Deficits in the United States," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 34-58, February.
  5. Evans, Paul, 1988. "Are Government Bonds Net Wealth? Evidence for the United States," Economic Inquiry, Western Economic Association International, vol. 26(4), pages 551-66, October.
  6. Hoelscher, Gregory, 1986. "New Evidence on Deficits and Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(1), pages 1-17, February.
  7. Martins, Marco Antonia Campos, 1980. "A Nominal Theory of the Nominal Rate of Interest and the Price Level," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 174-85, February.
  8. Correia-Nunes, Jose & Stemitsiotis, Loukas, 1995. "Budget Deficit and Interest Rates: Is There a Link? International Evidence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(4), pages 425-49, November.
  9. Evans, Paul, 1987. "Do budget deficits raise nominal interest rates? : Evidence from six countries," Journal of Monetary Economics, Elsevier, vol. 20(2), pages 281-300, September.
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