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Public debts, deficits and interest rates in CEECs: are there spatial spillovers?

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  • Lena Malešević Perović

Abstract

In this paper we extend the literature on the relationship between public debts, deficits and government bond yields in the following directions: we examine a set of 11 Central and Eastern European countries during the period 2006–2015; we apply a novel econometric technique that allows for spatial effects; and we test forward-looking instead of current values of explanatory variables thus addressing endogeneity problem. We find that there is overall a highly significant positive effect of both public debt and deficit on long-term interest rates. This effect is found to be larger in CEECs than in developed countries. Moreover, deficits are found to exert a large and significant indirect effect, and these spillovers amount to more than 50% of the overall effect.

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  • Lena Malešević Perović, 2018. "Public debts, deficits and interest rates in CEECs: are there spatial spillovers?," Post-Communist Economies, Taylor & Francis Journals, vol. 30(5), pages 675-692, September.
    • Handle: RePEc:taf:pocoec:v:30:y:2018:i:5:p:675-692
    DOI: 10.1080/14631377.2018.1443244
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    Cited by:

    1. Suvra Prokash Mondal & Biswajit Maitra, 2022. "Deficits, Debt and Interest Rates in Sri Lanka: Does the Spillover of Foreign Interest Rates Matter?," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 16(1), pages 28-48, February.

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