The Government Debt and the Long-Term Interest Rate: Application of the Loanable Funds Model to Greece
AbstractThis paper extends the open-economy loanable funds model to Greece and finds that a higher government debt/GDP ratio, a higher real short-term rate, a higher percent change in real GDP, a higher expected inflation rate, a higher EU government bond yield, or a higher nominal effective exchange rate increases the Greek government bond yield. In the conventional closed-economy loanable funds model, similar results are found, but the explanatory power is lower. In the conventional open-economy loanable funds model, the percent change in real GDP and the ratio of the net capital inflow to GDP have insignificant coefficients.
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Bibliographic InfoArticle provided by Center for Economic Integration, Sejong University in its journal Journal of Economic Integration.
Volume (Year): 25 (2010)
Issue (Month): ()
Government Debt; Long-term Interest Rate; Expected Inflation; World Interest Rate; Exchange Rate; Loanable Funds Model;
Find related papers by JEL classification:
- 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
- O52 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Europe
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