The Nominal Interest Rate Yield Response to Net Government Borrowing: GLM Estimates, 1972-2012

Cebula, Richard (2014): The Nominal Interest Rate Yield Response to Net Government Borrowing: GLM Estimates, 1972-2012.

Abstract

This study provides current empirical evidence on the impact of net U.S. government borrowing (budget deficits) on the nominal interest rate yield on ten-year Treasury notes. The model includes an ex ante real short-term real interest rate yield, an ex ante real long-term interest rate yield, the monetary base as a percent of GDP, expected future inflation, the percentage growth rate of real GDP, net financial capital inflows, and other variables. This study uses annual data for the period 1972-2012. GLM (Generalized Linear Model) estimates imply, among other things, that the federal budget deficit, expressed as a percent of GDP, exercised a positive and statistically significant impact on the nominal interest rate yield on ten-year Treasury notes over the study period.

• Item Type: MPRA Paper
• Language: English
• Keywords: nominal interest rate yield; budget deficits; GLM estimates
• Subjects: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E43 - Interest Rates: Determination, Term Structure, and Effects; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; H - Public Economics > H6 - National Budget, Deficit, and Debt > H62 - Deficit ; Surplus

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