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Budget deficits and the term structure of interest rates in Italy

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  • Bradley Ewing
  • Mark Yanochik

Abstract

This paper tests the hypothesis that changes in the federal budget deficit impact the term structure of interest rates in Italy. The results suggest that budget deficits increase the yield spread between long term government bonds and the three month Treasury bill. The implication is that budget deficits may hinder long-term economic growth in Italy, via a crowding out effect, by increasing long-term interest rates relative to short-term interest rates.

Suggested Citation

  • Bradley Ewing & Mark Yanochik, 1999. "Budget deficits and the term structure of interest rates in Italy," Applied Economics Letters, Taylor & Francis Journals, vol. 6(3), pages 199-201.
  • Handle: RePEc:taf:apeclt:v:6:y:1999:i:3:p:199-201
    DOI: 10.1080/135048599353636
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    Cited by:

    1. Cebula, Richard, 2014. "Have U.S. Budget Deficits Raised the Real Interest Rate Yield on Tax-Free Municipal Bonds?," MPRA Paper 55545, University Library of Munich, Germany.
    2. Richard J. Cebula, 2014. "Impact of Federal Government Budget Deficits on the Longer Term Real Interest Rate in the U.S.: Evidence Using Annual and Quarterly Data, 1960–2013," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot GmbH, Berlin, vol. 60(1), pages 23-40.
    3. Richard Cebula & Fiorentina Angjellari-Dajci & Maggie Foley, 2014. "An exploratory empirical inquiry into the impact of federal budget deficits on the ex post real interest rate yield on ten year Treasury notes over the last half century," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 38(4), pages 712-720, October.
    4. 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, University of Belgrade, vol. 55(184), pages 58-70, January –.
    5. Yu Hsing, 2015. "Determinants of the Government Bond Yield in Spain: A Loanable Funds Model," International Journal of Financial Studies, MDPI, Open Access Journal, vol. 3(3), pages 1-9, July.

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