Budget Deficits and Interest Rates in a Small Open
AbstractAdditional empirical research on the links between budget deficits and interest rates Is highly relevant for the ongoing discussion about the validity of the Keynesian Proposition and the Ricardian equivalence. This study using data from a small open Economy investigates the empirical framework of both paradigms by applying SURE Technique and impulse response functions. SURE results lead to the indication that a bidirectional pattern of causality might exist between budget deficits and interest rates. Impulse response functions show that deficits and interest rates follow a joint feedback Causality. This result is consistent with the Keynesian proposition, because changes in Interest rates are a response to positive movements in budget deficits. [E43, H62]
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal International Economic Journal.
Volume (Year): 16 (2002)
Issue (Month): 2 ()
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Web page: http://www.tandfonline.com/RIEJ20
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