Sovereign currency and long-term interest rates

Hongkil Kim

International Review of Applied Economics, 2021, vol. 35, issue 3-4, 577-596

Abstract: This paper investigates the effects of government debt and deficits on long-term interest rates in 17 advanced economies over the period 1973–2016 from the perspective of currency sovereignty. The empirical findings of this paper suggest the market penalizes non-sovereign nations for the same amount of fiscal deficit with higher interest rates than sovereigns. In addition, non-sovereign countries face accelerating interest rates for an increase in the debt-to-GDP ratio beyond a certain threshold (49% to GDP) while such a pattern is not obvious among sovereign nations. Overall, the results support Modern Monetary Theory (MMT) view that a monetarily sovereign government, as a monopoly issuer of currency, can influence the prices of their liabilities to a significant extent, somewhat independent of existing public debt and market sentiment.

Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/02692171.2021.1908237 (text/html)
Access to full text is restricted to subscribers.

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:taf:irapec:v:35:y:2021:i:3-4:p:577-596

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/CIRA20

DOI: 10.1080/02692171.2021.1908237

Access Statistics for this article

International Review of Applied Economics is currently edited by Professor Malcolm Sawyer

More articles in International Review of Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().