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The causality between budget deficit and interest rates in Japan: an application of time series analysis

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  • Benjamin Cheng

Abstract

Applying the Engle-Granger two-step procedure, this study finds that neither budget deficits, short-term interest rates and prices in one model nor budget deficits and longterm interest rates in the other model are cointegrated in Japan. Moreover, this study finds no causality between budget deficits and long-term interest rates but detects feedback causality between budget deficits and short-term interest rates in Japan using Hsiao's version of the Granger causality method with the aid of cointegration.

Suggested Citation

  • Benjamin Cheng, 1998. "The causality between budget deficit and interest rates in Japan: an application of time series analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 5(7), pages 419-422.
    • Handle: RePEc:taf:apeclt:v:5:y:1998:i:7:p:419-422
    DOI: 10.1080/135048598354546
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    Cited by:

    1. Hany Eldemerdash & Hugh Metcalf & Sara Maioli, 2014. "Twin deficits: new evidence from a developing (oil vs. non-oil) countries’ perspective," Empirical Economics, Springer, vol. 47(3), pages 825-851, November.
    2. Ranjan Kumar Mohanty & N. R. Bhanumurthy, 2021. "Revisiting the role of fiscal policy in determining interest rate in India," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 26(2), pages 293-318, April.
    3. Suvra Prokash Mondal & Biswajit Maitra, 2022. "Deficits, Debt and Interest Rates in Sri Lanka: Does the Spillover of Foreign Interest Rates Matter?," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 16(1), pages 28-48, February.

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