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Budget Deficits, Expected Inflation And Short-Term Real Interest Rates: Evidence For The U.S

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Author Info
DAVID W. FINDLAY
Abstract

This paper examines a number of issues concerning the determination of short-term real interest rates. We include actual inflation and several measures of expected inflation in order to determine whether empirical results are sensitive to the choice of the inflation variable. The results strongly suggest that the estimated coefficients are unaffected by the choice of the interest rate variable and, implicitly, the inflation variable. Deficits are not found to have a positive effect on all measures of the dependent variable, while increases in the real money supply and the inflation variables depress real interest rates. [311]

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Article provided by Korean International Economic Association in its journal International Economic Journal.

Volume (Year): 4 (1990)
Issue (Month): 3 (October)
Pages: 41-53
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Handle: RePEc:taf:intecj:v:4:y:1990:i:3:p:41-53

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  1. Evans, Paul, 1985. "Do Large Deficits Produce High Interest Rates?," American Economic Review, American Economic Association, vol. 75(1), pages 68-87, March.
  2. Carlson, John A, 1977. "Short-Term Interest Rates as Predictors of Inflation: Comment," American Economic Review, American Economic Association, vol. 67(3), pages 469-75, June.
  3. G.J. Santoni & Courtenay C. Stone, 1982. "The Fed and the real rate of interest," Review, Federal Reserve Bank of St. Louis, issue Dec, pages 8-19. [Downloadable!]
  4. Garbade, Kenneth & Wachtel, Paul, 1978. "Time variation in the relationship between inflation and interest rates," Journal of Monetary Economics, Elsevier, vol. 4(4), pages 755-765, November. [Downloadable!] (restricted)
  5. Wachtel, Paul & Young, John, 1987. "Deficit Announcements and Interest Rates," American Economic Review, American Economic Association, vol. 77(5), pages 1007-12, December. [Downloadable!] (restricted)
  6. D. Giannaros & B. Kolluri, 1989. "The Impact Of Budget Deficits On Real Interest Rates: An International Empirical Investigation," International Economic Journal, Korean International Economic Association, vol. 3(2), pages 17-25, June. [Downloadable!] (restricted)
  7. Joines, Douglas, 1977. "Short-Term Interest Rates as Predictors of Inflation: Comment," American Economic Review, American Economic Association, vol. 67(3), pages 476-77, June. [Downloadable!] (restricted)
  8. Carmichael, Jeffrey & Stebbing, Peter W, 1983. "Fisher's Paradox and the Theory of Interest," American Economic Review, American Economic Association, vol. 73(4), pages 619-30, September. [Downloadable!] (restricted)
  9. Fama, Eugene F, 1975. "Short-Term Interest Rates as Predictors of Inflation," American Economic Review, American Economic Association, vol. 65(3), pages 269-82, June. [Downloadable!] (restricted)
  10. Mishkin, Frederic S., 1981. "The real interest rate: An empirical investigation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 15, pages 151-200. [Downloadable!] (restricted)
  11. Kolluri, Bharat R. & Giannaros, Demetrios S., 1987. "Budget deficits and short-term real interest rate forecasting," Journal of Macroeconomics, Elsevier, vol. 9(1), pages 109-109. [Downloadable!] (restricted)
  12. Evans, Paul, 1987. "Interest Rates and Expected Future Budget Deficits in the United States," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 34-58, February. [Downloadable!] (restricted)
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