Budget Deficit and Interest Rates
AbstractThe article examines the impact of the budget deficit upon the term structure of Czech interest rates. An important feature of the model is that it enables us to directly test the predictions of the three alternative paradigms, the Keynesian, neoclassical and the Ricardian, concerning the long-term and short-term impact of deficit on interest rates. The result of the study, obtained by the IV method suggests that the budget deficit is negatively related to the interest rate level in the short-run. Therefore, the long-run Ricardian proposition cannot be rejected in favour of any alternative hypothesis.
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Bibliographic InfoArticle provided by University of Economics, Prague in its journal Prague Economic Papers.
Volume (Year): 2006 (2006)
Issue (Month): 1 ()
Postal: Editorial office Prague Economic Papers, University of Economics, nám. W. Churchilla 4, 130 67 Praha 3, Czech Republic
Find related papers by JEL classification:
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
- H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
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