Fiscal policy and interest rates in a small open economy

Jesper Lindé

Finnish Economic Papers, 2001, vol. 14, issue 2, 65-83

Abstract: This paper contains an empirical investigation of the effects of fiscal policy on interest rates based on a conventional stochastic macro model designed for a small open economy. The empirical investigation utilizes data for Sweden, a country which has experienced very large fluctuations in the government budget deficits and in the short- and long-term nominal interest rates, thus providing a better empirical test than previous studies. According to the empirical results, larger budget deficits induce higher interest rates, as implied by conventional macroeconomic theory.

JEL-codes: E12 E62 F41 (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:fep:journl:v:14:y:2001:i:2:p:65-83

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