Budget Deficits and Interest Rates: A Fresh Perspective

We extend the literature on budget deficits and interest rates in three ways: we examine both advanced and emerging economies and for the first time a large emerging market panel; explore interactions to explain some of the heterogeneity in the literature; and apply system GMM. There is overall a hi...

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Bibliographic Details
Main Author: Aisen, Ari (Author)
Format: Electronic eBook
Language:English
Published: Washington, D.C International Monetary Fund 2008
Series:IMF Working Papers Working Paper No. 08/42
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Summary:We extend the literature on budget deficits and interest rates in three ways: we examine both advanced and emerging economies and for the first time a large emerging market panel; explore interactions to explain some of the heterogeneity in the literature; and apply system GMM. There is overall a highly significant positive effect of budget deficits on interest rates, but the effect depends on interaction terms and is only significant under one of several conditions: deficits are high, mostly domestically financed, or interact with high domestic debt; financial openness is low; interest rates are liberalized; or financial depth is low
Physical Description:1 Online-Ressource (19 p)
ISBN:1451869045
9781451869040

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