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

Cebula, Richard (1997): 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. Published in: Review of Financial Economics , Vol. 7, No. 1 (17 April 1998): pp. 55-64.

Abstract

Using two alternative measures of expected inflation, this study investigates the impact of federal budget deficits on nominal long-term interest rate yields for the 1973.2-1995.4 period. Based on an open­ economy loanable funds framework, four instrumental variable esti­mates in first differences are provided. In all cases, the budget deficit is found to elevate the nominal long-term interest rate.

• Item Type: MPRA Paper
• Language: English
• Keywords: federal budget deficits; nominal long-term interest rates; crowding out
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E43 - Interest Rates: Determination, Term Structure, and Effects; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E47 - Forecasting and Simulation: Models and Applications; H - Public Economics > H6 - National Budget, Deficit, and Debt > H62 - Deficit ; Surplus

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