A Theoretical Note on the Impact of Debt Service Responsiveness to Interest Rates on Macroeconomic Stability

Richard Cebula () and Stephen M. Renas ()
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Stephen M. Renas: Wright State University Department of Economics, Postal: 260m Rike Hall, Dayton, OH 45435, U.S.A.,, http://www.wright.edu/

Economia Internazionale / International Economics, 2000, vol. 53, issue 2, 135-140

Abstract: This theoretical note examines the impact of the interest sensitivity of government outlays on macroeconomic stability and economic policy effectiveness. It is found that, if the interest sensitivity of government outlays exceeds the interest sensitivity of private sector spending, the condition for ISLM stability is reversed and a policy of increasing the money stock acts to reduce the level of GDP.

JEL-codes: E12 (search for similar items in EconPapers)
Date: 2000
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Persistent link: https://EconPapers.repec.org/RePEc:ris:ecoint:0245

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