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Fiscal Policy and the Yield Curve in a Small Open Economy

Author

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  • Lindé, Jesper

    (Dept. of Economics, Stockholm School of Economics)

Abstract

This paper contains an empirical investigation of the effects of fiscal policy on the yield curve based on a conventional stochastic macro model designed for a small open economy. The empirical investigation undertaken utilizes data for Sweden, a country which has experienced very large fluctuations in the government budget deficits and in the short- and long-term nominal interest rates, thus providing a better empirical test than previous studies. According to the empirical results, larger budget deficits spell higher interest rates, as posited by conventional macroeconomic theory.

Suggested Citation

  • Lindé, Jesper, 1998. "Fiscal Policy and the Yield Curve in a Small Open Economy," SSE/EFI Working Paper Series in Economics and Finance 220, Stockholm School of Economics, revised 17 Nov 1998.
    • Handle: RePEc:hhs:hastef:0220
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    Cited by:

    1. Vargas, Gregorio A., 2005. "Macroeconomic Determinants of the Movement of the Yield Curve," MPRA Paper 53117, University Library of Munich, Germany.

    More about this item

    Keywords

    Term structure of interest rates; Ricardian equivalence; budget deficits; small open economy; stationary and non-stationary time series.;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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