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An Empirical Note on the Impact of the Federal Budget Deficit on Ex Ante Real Long-Term, Interest Rates, 1973-1995

Cebula, Richard (1996): An Empirical Note on the Impact of the Federal Budget Deficit on Ex Ante Real Long-Term, Interest Rates, 1973-1995. Published in: Southern Economic Journal , Vol. 63, No. 4 (28. April 1997): pp. 1094-1099.

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Abstract

This study investigates the impact of the U.S. federal budget deficit on ex ante real long-term interest rates in the U.S. using quarterly data for the period from 1973 through 1995. The study adopts a loanable funds model. Two stage least squares estimates reveal that the federal budget deficit acted to elevate the ex ante real long term interest rate on ten year U.S. Treasury notes, Moody's Aaa-rated corporate bonds, and Moody's Baa-rated corporate bonds.

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