publication . Preprint . 2000

GOVERNMENT DEBT, INTEREST RATES AND INTERNATIONAL CAPITAL FLOWS: EVIDENCE FROM COINTEGRATION

Pene Kalulumia;
Open Access
  • Published: 01 Jan 2000
Abstract
This paper examines the impact of government debt on interest rates in the United States, Germany, the United Kingdom and Canada. It builds on the general portfolio balance framework which allows for both direct and indirect tests of the link between public debt and interest rates, and uses the Johansen-Juselius multivariate cointegration techniques to perform these tests. Indirect tests in this model consist of investigating the debt impact on interest rates through the effects of debt on the exchange rate and money demand. The evidence indicates that both transitory and permanent changes in the level of government debt cause higher domestic interest rates and ...
Subjects
free text keywords: jel:E62, jel:E63
33 references, page 1 of 3

1 0 0 0 0 1 0 0 0 0 1 0 H ' 0 0 &1 0 2 0 0 0 0 0 0 0 0 0 0 0 1 T-test values for á Arize, A. C. and Shwiff, S. S., "Cointegration, Real Exchange Rate and Modelling the Demand for Broad Money in Japan." Applied Economics, Volume 25, (June 1993), pp. 717-726.

Bahmani-Oskooee, M. and Payesteh S., "Do Budget Deficits cause Capital Inflows? Evidence from the United States." The Quarterly Review of Economics and Finance, Volume 34, No.1, (Spring 1994), pp. 63- 74.

Barro, R. J., "Government Spending, Interest Rates, Prices, and Budget Deficits in the United Kingdom, 1701- 1918." Journal of Monetary Economics, Volume 20, (1987), pp. 221-247.

Barth, J. R., Iden, G. and Russek, F. S., "Federal Borrowing and Short-term Interest Rates: Comment." Southern Economic Journal, Volume 52, (1985), pp. 554-559.

Cebula, R. J. and Koch, J. V., "Federal Budget Deficits, Interest Rates, and International Flows." The Quarterly Review of Economics and Finance, Volume 34, No.1, (Spring 1994), pp. 113-116.

Cebula, R. J. and Koch, J. V., "Federal Budget Deficits, Interest Rates, and International Flows." The Quarterly Review of Economics and Business, Volume 29, No.1, (1991), pp. 119-126.

Cushman, D.O., Lee, S. S. and Thorsteinn, T., "Maximum Likelihood Estimation of Cointegration in Exchange Rate Models for Seven Inflationary OECD Countries." Discussion Paper 95-7, University of Saskatchewan, Canada, (February 1995).

Deravi, M. K., Hegji, C. E. and Moberly, H. D., "Government Debt and the Demand for Money: An Extreme Bound Analysis." Economic Inquiry, Volume 28, (1990), pp. 390-401.

Engle, R. F. and Granger, C. W. J., "Cointegration and Error Correction: Representation, Estimation and Testing." Econometrica, Volume 55, (March 1987), pp. 251-276.

Evans, P., "Do Large Deficits Produce High Interest Rates?" American Economic Review, Volume 75, (1985), pp. 68-67.

Evans, P., "Do Budget Deficits Raise Nominal Interest Rates? Evidence from Six Countries." Journal of Monetary Economics, Volume 20, (1987), pp. 281-300.

Gulley, O. D., "An Empirical Test of the Effects of Government Deficits on Money Demand" Applied Economics,Volume 26, No.26, (1994), pp. 239-247. [OpenAIRE]

Hylleberg, S., Engle, R. F., Granger, C.W.J. and Yoo, B.S., "Seasonal Integration and Cointegration." Journal of Econometrics, Volume 44, (1990), pp. 215-238.

Johansen, S., "Statistical Analysis of Cointegration Vectors." Journal of Economic Dynamics and Control, Volume 12, (1988), pp. 231-254.

Johansen, S., "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models." Econometrica, Volume 59, No.6, (November 1991), pp. 1551-1580.

33 references, page 1 of 3
Any information missing or wrong?Report an Issue