IDEAS home Printed from https://ideas.repec.org/a/kap/pubcho/v60y1989i1p87-92.html
   My bibliography  Save this article

Budget deficits and interest rates in the United States

Author

Listed:
  • Kanhaya Gupta

Abstract

In this paper, an attempt has been made to reexamine the effect of budget deficits in the United States on interest rates. Unlike the previous studies which use only one definition of the dependent variable, we have used all three, namely, the nominal and the ex-post and the ex-ante real interest rate. Further, unlike previous studies, we considered both short-term and long-term interest rates. Our results provide absolutely no support for the proposition that federal deficits affect interest rates and thus contradict the recent findings by Cebula (1987) and Kolluri and Giannaros (1987). Finally, the paper provides some further support for the ‘inverted’ Fisher hypothesis proposed by Carmichael and Stebbing (1983). Copyright Kluwer Academic Publishers 1989

Suggested Citation

  • Kanhaya Gupta, 1989. "Budget deficits and interest rates in the United States," Public Choice, Springer, vol. 60(1), pages 87-92, January.
  • Handle: RePEc:kap:pubcho:v:60:y:1989:i:1:p:87-92
    DOI: 10.1007/BF00124314
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/BF00124314
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1007/BF00124314?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Richard Cebula, 1987. "Federal deficits and the real rate of interest in the United States: A note," Public Choice, Springer, vol. 53(1), pages 97-100, January.
    2. Evans, Paul, 1985. "Do Large Deficits Produce High Interest Rates?," American Economic Review, American Economic Association, vol. 75(1), pages 68-87, March.
    3. Evans, Paul, 1987. "Do budget deficits raise nominal interest rates? : Evidence from six countries," Journal of Monetary Economics, Elsevier, vol. 20(2), pages 281-300, September.
    4. 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.
    5. Makin, John H, 1983. "Real Interest, Money Surprises, Anticipated Inflation and Fiscal Deficits," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 374-384, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yu HSING, 2016. "Is real depreciation expansionary? The case of the Czech Republic," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(3(608), A), pages 93-100, Autumn.
    2. Yu HSING, 2016. "Is real depreciation expansionary? The case of the Czech Republic," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(608), A), pages 93-100, Autumn.
    3. HARJIT K. Arora & PAMI Dua, 1993. "Budget Deficits, Domestic Investment, And Trade Deficits," Contemporary Economic Policy, Western Economic Association International, vol. 11(1), pages 29-44, January.
    4. Carlos David Ardila-Dueñas & Hernán Rincón-Castro, 2019. "¿Cómo y qué tanto impacta la deuda pública a las tasas de interés de mercado?," Borradores de Economia 1077, Banco de la Republica de Colombia.
    5. Bob Barnes, 2007. "A Cointegrating approach to budget deficits and long-term interest rates," Applied Economics, Taylor & Francis Journals, vol. 40(2), pages 127-133.
    6. Augustine C. Arize & Ioannis N. Kallianotis & Scott Liu & John Malindretos & Alex Panayides, 2014. "National Debt and Its Effects on Several Other Variables: An Econometric Study of the United States," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 5(4), pages 98-113, October.
    7. Yu Hsing, 2010. "Government Borrowing And The Longterm Interest Rate: Application Of An Extended Loanable Funds Model To The Slovak Republic," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 55(184), pages 58-70, January –.
    8. Yu Hsing, 2016. "Is Real Depreciation Expansionary? The Case of Ireland," Bulletin of Applied Economics, Risk Market Journals, vol. 3(1), pages 1-9.
    9. Yu Hsing, 2016. "Is Real Depreciation Contractionary? The Case of South Korea," Economics Bulletin, AccessEcon, vol. 36(4), pages 1951-1958.
    10. HSING, Yu, 2016. "Is Real Depreciation Expansionary? The Case Of The Slovak Republic," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 16(2), pages 55-62.
    11. André Pinho & Ricardo Barradas, 2021. "Determinants of the Portuguese government bond yields," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 2375-2395, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Spector, Lee C, 1999. "Macroeconomic Models and the Determination of Crowding Out," Public Finance = Finances publiques, , vol. 54(1-2), pages 84-98.
    2. Carlos Vieira, 2004. "The Deficit?Interest Rate Connection: an empirical assessment of the EU," Economics Working Papers 5_2004, University of Évora, Department of Economics (Portugal).
    3. Oludele Akinloye Akinboade, 2004. "The relationship between budget deficit and interest rates in South Africa: some econometric results," Development Southern Africa, Taylor & Francis Journals, vol. 21(2), pages 289-302.
    4. Richard J. Cebula, 1991. "A Brief Empirical Note on the Impact of Budget Deficits on the Real Municipal Bond Rate," Public Finance Review, , vol. 19(4), pages 437-443, October.
    5. Yu Hsing, 2010. "Government Borrowing And The Longterm Interest Rate: Application Of An Extended Loanable Funds Model To The Slovak Republic," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 55(184), pages 58-70, January –.
    6. Richard Cebula, 1997. "The impact of net international capital inflows on nominal long-term interest rates in France," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 25(2), pages 179-190, June.
    7. André Pinho & Ricardo Barradas, 2021. "Determinants of the Portuguese government bond yields," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 2375-2395, April.
    8. Yu Hsing, 2015. "Determinants of the Government Bond Yield in Spain: A Loanable Funds Model," IJFS, MDPI, vol. 3(3), pages 1-9, July.
    9. Cebula, Richard & Koch, James, 1988. "An Empirical Note on Deficits, Interest Rates, and International Capital Flows," MPRA Paper 50165, University Library of Munich, Germany.
    10. repec:zbw:bofrdp:1988_013 is not listed on IDEAS
    11. Richard J. Cebula, 1989. "Federal Budget Deficits, International Capital Flows, and the Long-Term Nominal Rate of Interest in the United States," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 125(II), pages 157-164, June.
    12. Mª Mar Sánchez, 2002. "Interest-Rate Models For Us And Uk With Mixed Inflationary Expectations. A Comparison With The Rational And The Adaptive Scheme," Working Papers. Serie AD 2002-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    13. Kiani, Khurshid M., 2009. "Federal budget deficits and long-term interest rates in USA," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(1), pages 74-84, February.
    14. Virén, Matti, 1988. "Interest rates and budget deficits : Cross-country evidence from the period 1924-1938," Research Discussion Papers 13/1988, Bank of Finland.
    15. Elmendorf, Douglas W. & Gregory Mankiw, N., 1999. "Government debt," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 25, pages 1615-1669, Elsevier.
    16. Ardagna Silvia & Caselli Francesco & Lane Timothy, 2007. "Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-35, August.
    17. HARJIT K. Arora & PAMI Dua, 1993. "Budget Deficits, Domestic Investment, And Trade Deficits," Contemporary Economic Policy, Western Economic Association International, vol. 11(1), pages 29-44, January.
    18. repec:hal:spmain:info:hdl:2441/5221 is not listed on IDEAS
    19. Richard J. Cebula, 1997. "A Note on the Impact of Structural Federal Budget Deficits on Commercial Bank Interest Rates, 1963-1994," Public Finance Review, , vol. 25(4), pages 442-450, July.
    20. Hendershott, Patric H & Peek, Joe, 1992. "Treasury Bill Rates in the 1970s and 1980s," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(2), pages 195-214, May.
    21. David Alan Aschauer, 1990. "Finite Horizons, Intertemporal Substitution, and Fiscal Policy," Public Finance Review, , vol. 18(1), pages 77-91, January.
    22. Cebula, Richard J., 1995. "The impact of federal government budget deficits on economic growth in the united states: an empirical investigation, 1955-1992," International Review of Economics & Finance, Elsevier, vol. 4(3), pages 245-252.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:pubcho:v:60:y:1989:i:1:p:87-92. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.