Large Deficits Produce High Interest Rates

Richard Cebula (), Mark Schwartzburt and Gerald Scott

MPRA Paper from University Library of Munich, Germany

Abstract: Evans has argued that the federal budget deficit in the United States does not influence the real rate of interest. Indeed, Evans (1985, p. 85) goes so far as to claim that “in over a century of U.S. history, large deficits have never been associated with high interest rate”. By contrast, using two quarterly models that directly parallel Evans’ IS-LM framework, we find strong empirical evidence that the federal budget deficit does in fact raise the ex post real rate of interest. It would appear that Evans’ conclusions are questionable.

Keywords: budget deficits; interest rates; crowding out (search for similar items in EconPapers)
JEL-codes: E40 E43 H62 (search for similar items in EconPapers)
Date: 1990-06-21
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in The Indian Journal of Economics 234.72(1991): pp. 115-119

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/56486/1/MPRA_paper_56486.pdf original version (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:pra:mprapa:56486

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().