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Budget deficits and interest rates in Germany

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  • Richard Cebula

Abstract

This study uses the basic tools of cointegration to determine whether there exists a long-term relationship between budget deficits and nominal interest rates in Germany. Maximum eigenvalue, trace, and likelihood ratio tests all affirm that there does apparently exist a long-term relationship between the budget deficit and the nominal interest rate. Accordingly, regression studies and formal causality tests have a reasonable basis for investigating whether budget deficits lead to higher interest rates in Germany. Copyright International Atlantic Economic Society 2003

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  • Richard Cebula, 2003. "Budget deficits and interest rates in Germany," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 9(1), pages 64-68, February.
    • Handle: RePEc:kap:iaecre:v:9:y:2003:i:1:p:64-68:10.1007/bf02295302
    DOI: 10.1007/BF02295302
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    1. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    2. 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.
    3. Cebula, Richard J, 1988. "Federal Government Budget Deficits and Interest Rates: An Empirical Analysis for the United States, 1955-1984," Public Finance = Finances publiques, , vol. 43(3), pages 337-348.
    4. 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.
    5. Cebula, Richard J. & Bates, Kimberly & Marks, Louise & Roth, Allison, 1988. "Federal Government Budget Deficits and Interest Rates in the United States: An Empirical Analysis," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 41(1-2), pages 1-7.
    6. James R. Barth & George Iden & Frank S. Russek, 1984. "Do Federal Deficits Really Matter?," Contemporary Economic Policy, Western Economic Association International, vol. 3(1), pages 79-95, September.
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    Cited by:

    1. R.J. Cebula, 1997. "Government deficit, ex post real long-term interest rates and causality," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 50(202), pages 325-336.
    2. Richard Cebula, 1997. "The impact of net international capital inflows on nominal long-term interest rates in France," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 25(2), pages 179-190, June.
    3. Artatrana Ratha, 2012. "Twin Deficits or Distant Cousins? Evidence from India1," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 13(1), pages 51-68, March.
    4. Harvie, Charles & Saleh, Ali Salman, 2007. "Lebanon’s Fiscal Crisis and Economic Reconstruction after War: the case of a bridge too far?," Economics Working Papers wp07-04, School of Economics, University of Wollongong, NSW, Australia.
    5. Bob Barnes, 2007. "A Cointegrating approach to budget deficits and long-term interest rates," Applied Economics, Taylor & Francis Journals, vol. 40(2), pages 127-133.
    6. Artatrana Ratha, 2010. "Twin Deficits or Distant Cousins? Evidence from India," Working Papers 2010-5 Classification- F , Saint Cloud State University, Department of Economics.
    7. Harvie, Charles & Saleh, Ali Salman, 2008. "Lebanon's economic reconstruction after the war: A bridge too far?," Journal of Policy Modeling, Elsevier, vol. 30(5), pages 857-872.
    8. Yu Hsing, 2015. "Determinants of the Government Bond Yield in Spain: A Loanable Funds Model," IJFS, MDPI, vol. 3(3), pages 1-9, July.
    9. Maria Carme Riera i Prunera, 2003. "Deficit, human capital and economic growth dynamics," Working Papers in Economics 102, Universitat de Barcelona. Espai de Recerca en Economia.
    10. Eric Wang & Eskander Alvi, 2011. "Relative Efficiency of Government Spending and Its Determinants: Evidence from East Asian Countries," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 1(1), pages 3-28, June.
    11. Perveen, Asma & Munir, Kashif, 2017. "Impact of Total, Internal and External Government Debt on Interest Rate in Pakistan," MPRA Paper 83427, University Library of Munich, Germany.

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