THE IMPACT OF PUBLIC DEBT ON THE LONG-TERM INTEREST RATES IN THE EURO AREA MEMBER COUNTRIES DURING 2003-2010

Piotr Misztal

Oeconomia Copernicana, 2011, vol. 2, issue 3, 23-42

Abstract: The main aim of the article is to analyze the relationship between public debt and the real, long-term interest rates in the euro area member countries during 2003-2010. The first part dealt with theoretical analysis and the most important results of empirical studies concerning the relationship between public debt and the real, long-term interest rates. In the next part of article, there were examined the relationships between public debt and the real, long-term interest rates in the euro area countries by using the Vector Autoregression Model (VAR). There were estimated elasticity coefficients of the real, long-term interest rates to public debt and measured the impact strength of public debt to changes in the real, long-term interest rate in the euro area member countries using the impulse response function. This was followed by decomposition of the real, long-term interest rate to estimate the impact of public debt and the real, long-term interest rate changes on the volatility of the real, long-term interest rate in the euro area member countries.

Keywords: budget debt; bond interest rates; VAR model (search for similar items in EconPapers)
JEL-codes: H62 H81 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:pes:ieroec:v:2:y:2011:i:3:p:23-42

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