Reconsidering the link between fiscal policy and interest rates in Australia

Yong Hong Yan and Shane Brittle
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Yong Hong Yan: Treasury, Government of Australia
Shane Brittle: Treasury, Government of Australia

No 2010-04, Treasury Working Papers from The Treasury, Australian Government

Abstract: This paper examines the empirical relationship between government debt and the real interest margin between Australian and US 10 year government bond yields. Results for the period 1990 to 2009 suggest that Australian general government net debt has no impact on the short run real interest margin, and has only a small effect in the long run. Further, the estimates suggest that movements in US general government net debt have a considerably larger effect than Australian general government net debt - implying that US influences take greater prominence in explaining the real interest margin.

Keywords: Interest rates; fiscal policy (search for similar items in EconPapers)
JEL-codes: E42 E62 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2010-09, Revised 2010-09
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