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Budget deficits and long-term interest rates: 1973–91

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  • Richard Cebula

Abstract

This study investigates the relationship between nominal long-term interest rates and central government budget deficits during the post-Bretton Woods era in Italy. The analysis is based in an open-economy, loanable-funds framework. The cointegration results indicate, among other things, the existence of a long-term positive relationship between the long-term interest rate and the deficit. Copyright International Atlantic Economic Society 1998

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  • Richard Cebula, 1998. "Budget deficits and long-term interest rates: 1973–91," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 4(4), pages 374-383, November.
    • Handle: RePEc:kap:iaecre:v:4:y:1998:i:4:p:374-383:10.1007/bf02295691
    DOI: 10.1007/BF02295691
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    1. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    2. 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.
    3. Evans, Paul, 1985. "Do Large Deficits Produce High Interest Rates?," American Economic Review, American Economic Association, vol. 75(1), pages 68-87, March.
    4. R.J. Cebula, 1997. "Government deficit, ex post real long-term interest rates and causality," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 50(202), pages 325-336.
    5. Cebula, Richard J & Belton, Willie J, 1993. "Government Budget Deficits and Interest Rates in the United States: Evidence for Closed and Open Systems Put into Perspective, 1955-1989," Public Finance = Finances publiques, , vol. 48(2), pages 188-209.
    6. Richard Cebula, 1989. "More on budget deficits and interest rates in the United States," Public Choice, Springer, vol. 60(1), pages 93-97, January.
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    Cited by:

    1. Bob Barnes, 2007. "A Cointegrating approach to budget deficits and long-term interest rates," Applied Economics, Taylor & Francis Journals, vol. 40(2), pages 127-133.
    2. Chakraborty, Lekha S., 2006. "Fiscal deficit, capital formation, and crowding out: Evidence from India," Working Papers 06/43, National Institute of Public Finance and Policy.

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