IDEAS home Printed from https://ideas.repec.org/a/sae/pubfin/v25y1997i4p442-450.html
   My bibliography  Save this article

A Note on the Impact of Structural Federal Budget Deficits on Commercial Bank Interest Rates, 1963-1994

Author

Listed:
  • Richard J. Cebula

    (Georgia Institute of Technology)

Abstract

For the period 1963-1994, this study (a) empiracally investigates the impact of structural federal budget deficits on the commercial bank cost of deposits and prime rate of interest and (b) provides currentlupdated information through 1994 on this important policy issue of the interest rate impact of budget deficits. The instrumental variables estimates in this study, which are based in a loanable funds framework, find the cost of deposits at commercial banks to be an increasing function of the structural deficit but the prime rate at banks to be unaffected by the deficit. The former result has potential implications for crowding out.

Suggested Citation

  • 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.
    • Handle: RePEc:sae:pubfin:v:25:y:1997:i:4:p:442-450
    DOI: 10.1177/109114219702500405
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/109114219702500405
    Download Restriction: no
    File URL: https://libkey.io/10.1177/109114219702500405?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
    ---><---

    References listed on IDEAS

    as
    1. Evans, Paul, 1985. "Do Large Deficits Produce High Interest Rates?," American Economic Review, American Economic Association, vol. 75(1), pages 68-87, March.
    2. McMillin, W. Douglas, 1986. "Federal deficits and short-term interest rates," Journal of Macroeconomics, Elsevier, vol. 8(4), pages 403-422.
    3. Hoelscher, Gregory, 1986. "New Evidence on Deficits and Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(1), pages 1-17, February.
    4. 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.
    5. James R. Barth & George Iden & Frank S. Russek, 1984. "Do Federal Deficits Really Matter?," Contemporary Economic Policy, Western Economic Association International, vol. 3(1), pages 79-95, September.
    Full references (including those not matched with items on IDEAS)

    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. Cebula, Richard J., 1998. "An empirical analysis of the impact of federal budget deficits on long-term nominal interest rate yields, 1973.2-1995.4, using alternative expected inflation measures," Review of Financial Economics, Elsevier, vol. 7(1), pages 55-64.
    2. Cebula, Richard & Koch, James, 1988. "An Empirical Note on Deficits, Interest Rates, and International Capital Flows," MPRA Paper 50165, University Library of Munich, Germany.
    3. Stephen M. Miller & Frank S. Russek, 1991. "The Temporal Causality Between Fiscal Deficits And Interest Rates," Contemporary Economic Policy, Western Economic Association International, vol. 9(3), pages 12-23, July.
    4. 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.
    5. Belton, Willie & Cebula, Richard, 1994. "International Capital Flows, Federal Budget Deficits, and Interest Rates, 1971-1984," MPRA Paper 52345, University Library of Munich, Germany.
    6. 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.
    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. 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.
    9. Yu Hsing, 2015. "Determinants of the Government Bond Yield in Spain: A Loanable Funds Model," IJFS, MDPI, vol. 3(3), pages 1-9, July.
    10. Richard J. Cebula, 2002. "A contemporary investigation of causality between the primary government budget deficit and the ex ante real long term interest rate in the US," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 55(223), pages 417-435.
    11. 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).
    12. Cebula, Richard & McGrath, Richard, 2006. "Identifying Determinants of the Cost of Long Term Borrowing for U.S. Firms: Insights for Management," MPRA Paper 49647, University Library of Munich, Germany.
    13. David Alan Aschauer, 1990. "Finite Horizons, Intertemporal Substitution, and Fiscal Policy," Public Finance Review, , vol. 18(1), pages 77-91, January.
    14. Richard Cebula, 1998. "Empirical note on the impact of federal government budget deficits on bank mortgage rates in the US, 1963-1995," Applied Economics Letters, Taylor & Francis Journals, vol. 5(6), pages 365-367.
    15. Richard J Cebula, 2004. "The Impact of the Federal Budget Deficit on the Nominal Interest Rate Yield on U.S. Treasury Notes, 1979-2001," The IUP Journal of Applied Economics, IUP Publications, vol. 0(2), pages 7-18, March.
    16. 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.
    17. R.J. Cebula, 1997. "Government deficit, ex post real long-term interest rates and causality," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 50(202), pages 325-336.
    18. M. A. Akhtar, 1995. "Monetary Policy And Long‐Term Interest Rates: A Survey Of Empirical Literature," Contemporary Economic Policy, Western Economic Association International, vol. 13(3), pages 110-130, July.
    19. Cebula, Richard & McGrath, Richard & Toma, Michael, 2005. "Impact of the Primary Budget Deficit on the Nominal Long Term Interest Rate Yield on Tax Free Municipal Bonds," MPRA Paper 61411, University Library of Munich, Germany.
    20. David Bowles & Holley Ulbrich & Myles Wallace, 1988. "Default Risk and the Effects of Fiscal Policy on Interest Rates: 1929–1945," Public Finance Review, , vol. 16(3), pages 357-373, July.

    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:sae:pubfin:v:25:y:1997:i:4:p:442-450. 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: SAGE Publications (email available below). General contact details of provider: .

    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.