Skip to main content

Interest rates and budget deficits revisited-evidence from the G7 countries

Buy Article:

$47.50 plus tax (Refund Policy)

This article revisits whether budget deficits affect interest rates, and broadens the literature by examining whether financial globalization has changed this relationship. A structural model of interest determination is extended to account for the fact that official capital flows are determined differently than private flows and is estimated for a 1960-2005 G7 panel. We find that deficits have a significant but small effect on long-term rates, but that this result depends on the fiscal concept used. Moreover, we find no evidence of structural change in interest rate determination in the recent decades, with the exception of an increased impact of insurance-related capital inflows in recent years.
No Reference information available - sign in for access.
No Citation information available - sign in for access.
No Supplementary Data.
No Article Media
No Metrics

Document Type: Research Article

Affiliations: International Monetary Fund, Washington, DC 20431, USA

Publication date: 01 May 2011

More about this publication?
  • Access Key
  • Free content
  • Partial Free content
  • New content
  • Open access content
  • Partial Open access content
  • Subscribed content
  • Partial Subscribed content
  • Free trial content
Cookie Policy
Cookie Policy
Ingenta Connect website makes use of cookies so as to keep track of data that you have filled in. I am Happy with this Find out more