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A Nominal Theory of the Nominal Rate of Interest and the Price Level: Some Empirical Evidence

Author

Listed:
  • Tito B.S. Moreira

    (Catholic University of Brasilia)

  • Geraldo Silva Souza

    (University of Brasilia)

Abstract

This paper aims to investigate the impact of the bond/money ratio on the nominal interest rate. The econometric model chosen fits a dynamic panel data for Canada, Japan and US over the period 1980-2006. We found empirical evidence that Ricardian Equivalence does not hold. The analysis indicates, for the three countries, that the bond/money ratio affects the nominal interest rate.

Suggested Citation

  • Tito B.S. Moreira & Geraldo Silva Souza, 2009. "A Nominal Theory of the Nominal Rate of Interest and the Price Level: Some Empirical Evidence," Economics Bulletin, AccessEcon, vol. 29(4), pages 3120-3125.
    • Handle: RePEc:ebl:ecbull:eb-09-00402
    as

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    References listed on IDEAS

    as
    1. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    2. Evans, Paul, 1988. "Are Government Bonds Net Wealth? Evidence for the United States," Economic Inquiry, Western Economic Association International, vol. 26(4), pages 551-566, October.
    3. Hoelscher, Gregory, 1986. "New Evidence on Deficits and Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(1), pages 1-17, February.
    4. Evans, Paul, 1987. "Interest Rates and Expected Future Budget Deficits in the United States," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 34-58, February.
    5. Evans, Paul, 1987. "Do budget deficits raise nominal interest rates? : Evidence from six countries," Journal of Monetary Economics, Elsevier, vol. 20(2), pages 281-300, September.
    6. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    7. Martins, Marco Antonia Campos, 1980. "A Nominal Theory of the Nominal Rate of Interest and the Price Level," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 174-185, February.
    8. Correia-Nunes, Jose & Stemitsiotis, Loukas, 1995. "Budget Deficit and Interest Rates: Is There a Link? International Evidence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(4), pages 425-449, November.
    9. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
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    Cited by:

    1. Moreira, Tito Belchior S., 2011. "Brazil: an empirical study on fiscal policy transmission," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.

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    More about this item

    Keywords

    Government debt; Ricardian equivalence; bond/money ratio.;
    All these keywords.

    JEL classification:

    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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