Does more government deficit raise the interest rate? Application of extended loanable funds model to Slovenia
AbstractExtending the open-economy loanable funds model, this paper finds that more government deficit as a percentage of GDP does not lead to a higher government bond yield. In addition, a higher real Treasury bill rate, a higher expected inflation rate, a higher EU government bond yield, or an expected depreciation of the euro against the U.S. dollar would increase Slovenia’s long-term interest rate. The negative coefficient of the percentage change in real GDP is insignificant at the 10% level. Applying the standard closed-economy or open-economy loanable funds model without including the world interest rate and the expected exchange rate, we find similar conclusions except that the positive coefficient of the ratio of the net capital inflow to GDP has a wrong sign and is insignificant at the 10% level.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by University of Rijeka, Faculty of Economics in its journal Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics.
Volume (Year): 27 (2009)
Issue (Month): 2 ()
Contact details of provider:
Postal: p.p. 113, 51000 RIJEKA, Ivana Filipovica 4
Web page: https://www.efri.uniri.hr/en/proceedings
More information through EDIRC
government deficits; long-term interest rates; loanable funds model expected inflation; world interest rates; expected exchange rates;
Find related papers by JEL classification:
- P43 - Economic Systems - - Other Economic Systems - - - Finance; Public Finance
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert J. Barro, 1986.
"Government Spending, Interest Rates, Prices, and Budget Deficits in the United Kingdom, 1701-1918,"
NBER Working Papers
2005, National Bureau of Economic Research, Inc.
- Barro, Robert J., 1987. "Government spending, interest rates, prices, and budget deficits in the United Kingdom, 1701-1918," Journal of Monetary Economics, Elsevier, vol. 20(2), pages 221-247, September.
- Barro, Robert J, 1989.
"The Ricardian Approach to Budget Deficits,"
Journal of Economic Perspectives,
American Economic Association, vol. 3(2), pages 37-54, Spring.
- 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.
- Aschauer, David Alan, 1989.
"Does public capital crowd out private capital?,"
Journal of Monetary Economics,
Elsevier, vol. 24(2), pages 171-188, September.
- 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..
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Antica Sergovic).
If references are entirely missing, you can add them using this form.