Deficit-financed tax cuts and interest rates

Sylvain Leduc

Business Review, 2004, issue Q2, 30-37

Abstract: Why do proposals to lower taxes often meet with opposition in Congress. One argument is that lowering taxes without an equivalent fall in government spending may lead to future budget deficits, which will translate into higher long-term interest rates and a lower level of income. Sylvain Leduc discusses the theoretical arguments under which budget deficits lead to higher interest rates. He also surveys empirical studies that used data on expected budget deficits to document the possibility that increases in future budget deficits are associated with higher real long-term interest rates.

Keywords: Interest rates; Taxation; Deficit financing (search for similar items in EconPapers)
Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.philadelphiafed.org/-/media/frbp/asset ... 2004/q2/brq204sl.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedpbr:y:2004:i:q2:p:30-37

Ordering information: This journal article can be ordered from

Access Statistics for this article

Business Review is currently edited by Becca Sells

More articles in Business Review from Federal Reserve Bank of Philadelphia Contact information at EDIRC.
Bibliographic data for series maintained by Beth Paul ().