Budget deficits and real interest rates: updated empirical evidence on causality.: An article from: Atlantic Economic Journal

This digital document is an article from Atlantic Economic Journal, published by Atlantic Economic Society on September 1, 2003. The length of the article is 5740 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser.

From the author: Using error-correction model (ECM) estimation, the paper empirically examines the causality relationship between the federal government budget deficit and the ex ante real interest rate yield on high grade long term tax free municipal bonds in the U.S. To clarify this deficit or interest rate relationship, the budget deficit is measured by the primary budget deficit, which excludes net interest payments by the Treasury. In a model that includes federal personal income tax rates and net international capital flows, as well as money supply growth, the ECM estimates strongly suggest a bi-directional relationship between the primary budget deficit and the ex ante real interest rate yield. Budget deficits apparently do matter! William Simon's concerns were justified. (JEL H61, H62, H69, E43, E62)

Citation Details
Title: Budget deficits and real interest rates: updated empirical evidence on causality.
Author: Richard Cebula
Publication:Atlantic Economic Journal (Refereed)
Date: September 1, 2003
Publisher: Atlantic Economic Society
Volume: 31 Issue: 3 Page: 255(11)

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