Fiscal policy, trigger points and interest rates: Additional evidence from the U.S

Gerhard Reitschuler and Rupert Sendlhofer ()

Working Papers from Faculty of Economics and Statistics, Universität Innsbruck

Abstract: We empirically investigate whether the relationship between interest rates and public deficits/debt may be nonlinear for the U.S. Using threshold estimation, we find evidence of level-dependent effects on interest rates, implying a significant effect of projected deficits and debt in the U.S. only if the deficit surpasses approximately 5% of GDP.

Keywords: Public debt; public deficit; long-term interest rates; nonlinearity; threshold models; Domar model (search for similar items in EconPapers)
JEL-codes: E43 E62 H62 (search for similar items in EconPapers)
Pages: 31
Date: 2011-10
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Persistent link: https://EconPapers.repec.org/RePEc:inn:wpaper:2011-23

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