Deficits and Real Interest Rates in the United States: A Note on the Barro Theory versus the Cuckierman-Meltzer Theory of Government Debt and Deficits in a Neo-Ricardian Framework
The theory of « Ricardian Equivalence » as presented by Barro (1974) argues that government budget deficits exercise no impact on the rate of interest in an economy. By contrast, Cukierman and Meltzer (1989) argue that, under very reasonable circumstances, deficits will in fact raise real interest rates. The present paper empirically examines the validity of these two opposing views within the context of an open IS-LM system, using quarterly data for the United States over the period 1960-1985. Estimating by Instrumental Variables and in first differences, this study finds very strong empirical evidence that deficits do raise real interest rates. This evidence strongly supports the Cukierman-Meltzer arguments.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): 45 (1992)
Issue (Month): 3-4 ()
|Contact details of provider:|| Postal: Via Garibaldi 4, 16124 Genova, Italy|
Phone: +39 010 27041
Fax: +39 010 2704222
Web page: http://www.ge.camcom.it/IT/Tool/Modulistica
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ris:ecoint:0450. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Angela Procopio)
If references are entirely missing, you can add them using this form.