Government Debt and the Demand for Money: An Extreme Bound Analysis
AbstractThe article provides evidence that there is a relationship between government debt and interest rates via the demand for money. This relationship is examined through the wealth effect of government debt on money demand, and the robustness of the results is tested by the use of extreme bound analysis in addition to standard econometric techniques. The authors find that ordinary least squares regression shows government debt affecting the demand for money positively, implying that federal government debt is net wealth. In addition, the extreme bound analysis shows that the estimates of the government debt coefficient are robust under alternative specifications of the Goldfeld model. Copyright 1990 by Oxford University Press.
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Bibliographic InfoArticle provided by Western Economic Association International in its journal Economic Inquiry.
Volume (Year): 28 (1990)
Issue (Month): 2 (April)
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- Pene Kalulumia, 2000. "Government Debt, Interest Rates And International Capital Flows: Evidence From Cointegration," Cahiers de recherche 00-03, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
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