The Effects of Government Budget Deficits on the Interest Rates: A Case Study of a Small Open Economy

Mushtaq Ahmad
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Mushtaq Ahmad: Sultan Qaboos University, Postal: P.O. Box 50 , , Muscat 123 , , Sultanate of Oman, http://www.squ.edu.om/

Economia Internazionale / International Economics, 1994, vol. 47, issue 1, 1-6

Abstract: This paper investigates the relationship between interest rates and government budget deficits in Pakistan over the period from 1970: I to 1991: IV. The results reveal that government budget deficits do not exert significant influence on nominal or real interest rates. These findings do not lend support to the « Crowding-Out » hypothesis winch suggests an inverse relationship between government budget deficits and rate of interest.

Date: 1994
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