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Effects of government debt on interest rates: evidence from causality tests in johansen-type models

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  • Pene Kalulumia

    ()
    (Département d'économique, Université de Sherbrooke)

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    Abstract

    This paper examines the impact of government debt on interest rates in the United States, Germany, the United Kingdom and Canada, using the sequential causality test procedures suggested by Toda and Phillips (1994) in the Johansen error-correction model (ECM). The general portfolio balance model, which allows for both direct and indirect tests of the link between public debt and interest rates, is used as the economic framework. Indirect tests in this model consist of investigating the debt impact on interest rates through the effects of debt on the exchange rate and money demand. The evidence generally indicates the absence of causality in the long-run, between government debt and interest-rate related variables for all four countries under study. This suggests the neutrality of public debt on interest rates and is consistent with the Ricardian equivalence hypothesis.

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    File URL: http://gredi.recherche.usherbrooke.ca/wpapers/02_07_pk.pdf
    File Function: First version, 2002
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    Bibliographic Info

    Paper provided by Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke in its series Cahiers de recherche with number 02-07.

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    Length: 28 pages
    Date of creation: 2002
    Date of revision:
    Handle: RePEc:shr:wpaper:02-07

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    Postal: Sherbrooke, Québec, J1K 2R1
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    Web page: http://www.gredi.org/home/documents-de-travail
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    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Cyril Téjédo & Michel Truchon, 2001. "Serial Cost Sharing in Multidimensional Contexts," Cahiers de recherche 01-07, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
    2. Daniel Parent, 1995. "Matching, Human Capital, and the Covariance Structure of Earnings," CIRANO Working Papers 95s-25, CIRANO.
    3. Paul Makdissi & Quentin Wodon, 2000. "Consumption Dominance Curves: Testing for the Impact of Tax Reforms on Poverty," Cahiers de recherche 00-05, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
    4. Hanel, P., 1995. "Analyse de la performance a exporter des industries manufacturieres du Quebec," Cahiers de recherche 95-02, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
    5. Truchon, Michel & Téjédo, Cyril, 2002. "Monotonicity and Bounds for Cost Shares under the Path Serial Rule," Cahiers de recherche 0203, Université Laval - Département d'économique.
    6. Daniel Parent, 1997. "Methods of Pay and Earnings: A Longitudinal Analysis," CIRANO Working Papers 97s-14, CIRANO.
    7. Daniel Parent, 1995. "Industry-Specific Capital and the Wage Profile: Evidence from the NLSY and the PSID," Working Papers 729, Princeton University, Department of Economics, Industrial Relations Section..
    8. Duclos, Jean-Yves & Makdissi, Paul & Wodon, Quentin, 2002. "Socially-Efficient Tax Reforms," Cahiers de recherche 0201, Université Laval - Département d'économique.
    9. Petr Hanel & Sofiene Zorgati, 2000. "Technology Spillovers and Trade:Empirical Evidence for the G7 Industrial Countries," Cahiers de recherche 00-07, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
    10. André Leclerc & Mario Fortin, 2002. "Production Et Rationalisation Des Intermédiaires Financiers : Leçons À Tirer De L’Expérience Des Caisses Populaires Acadiennes," Cahiers de recherche 02-03, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
    11. Jean-Yves Duclos & Paul Makdissi & Quentin Wodon, 2005. "Poverty-Reducing Tax Reforms with Heterogeneous Agents," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(1), pages 107-116, 02.
    12. St-Pierre, A & Hanel, P, 1996. "Les effets directs et indirects de l'activite de R&D sur la profitabilite de la firme," Cahiers de recherche 96-01, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
    13. W. Bentley MacLeod & Daniel Parent, 1998. "Job Characteristics and the Form of Compensation," CIRANO Working Papers 98s-08, CIRANO.
    14. Paul Makdissi & Quentin Wodon, 2004. "Fuzzy Targeting Indices and Orderings," Bulletin of Economic Research, Wiley Blackwell, vol. 56(1), pages 41-51, 01.
    15. Paul Makdissi & Quentin Wodon, 2004. "Measuring Poverty Reduction and Targeting Performance Under Multiple Government Programs," Review of Development Economics, Wiley Blackwell, vol. 8(4), pages 573-582, November.
    16. Parent, D., 1995. "Wages and Mobility: the Impact of Employer-Provided Training," Cahiers de recherche 9507, Universite de Montreal, Departement de sciences economiques.
    17. Bilodeau, M. & Slivinsky, A., 1994. "Toilet Cleaning and Department Chairing: Volunteering a public service," Cahiers de recherche 94-01, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
    18. Paul Makdissi & Nguyen Mahn Hung, 2003. "Infantile mortality and fertility decisions in a stochastic environment," Economics Bulletin, AccessEcon, vol. 10(2), pages 1-9.
    19. Paul Makdissi & Quentin Wodon, 2001. "Fuel Poverty and Access to Electricity:\\ Comparing Households When They Differ in Needs," Cahiers de recherche 01-03, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke, revised 2004.
    20. Makdissi, Paul & Groleau, Yves, 2002. "Que pouvons-nous apprendre des profils de pauvreté canadiens?," L'Actualité Economique, Société Canadienne de Science Economique, vol. 78(2), pages 257-286, Juin.
    21. Mario Fortin & André Leclerc, 2000. "Demographic Changes and Real Housing Prices in Canada," Cahiers de recherche 00-06, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
    22. Paul Makdissi & Quentin Wodon, 2006. "Fuel poverty and access to electricity: comparing households when they differ in needs," Applied Economics, Taylor & Francis Journals, vol. 38(9), pages 1071-1078.
    23. Petr Hanel, 2001. "Current Intellectual Protection practices by Manufacturing firms in Canada," Cahiers de recherche 01-09, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
    24. Duclos, Jean-Yves & Makdissi, Paul, 2001. "Restricted Inequality and Relative Poverty," Cahiers de recherche 0113, Université Laval - Département d'économique.
    25. Paul Makdissi & Quentin Wodon, 2002. "Can Safety Nets Offset the Impact of Risk on Wage Inequality and Social Welfare?," Cahiers de recherche 02-08, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke, revised 2002.
    26. Bilodeau, Marc & Slivinski, Al, 1996. "Volunteering nonprofit entrepreneurial services," Journal of Economic Behavior & Organization, Elsevier, vol. 31(1), pages 117-127, October.
    27. Duclos, Jean-Yves & Makdissi, Paul & Wodon, Quentin, 2003. "Poverty-Efficient Transfer Programs: The Role of Targeting and Allocation Rules," Cahiers de recherche 0305, CIRPEE.
    28. repec:ebl:ecbull:v:10:y:2003:i:2:p:1-9 is not listed on IDEAS
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    Cited by:
    1. Pene Kalulumia & Denis Bolduc, 2004. "Generalized Mixed Estimation Of A Multinomial Discretecontinuous Choice Model For Electricity Demand," Cahiers de recherche 04-01, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
    2. Petr Hanel, 2003. "Impact Of Government Support Programs On Innovation By Canadian Manufacturing Firms," Cahiers de recherche 04-02, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.

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