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Do Structural Federal Budget Deficits Impact Commercial Bank Interest Rates? A Comment

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  • Ali F. Darrat

    (Louisiana Tech University)

Abstract

This article finds no compelling evidence to support Cebula's recent claim that higher structural budget deficits in the United States have raised commercial bank interest rates. It appears that Cebula's results are spurious and likely the outcome of the use of nonstationary data. Correcting for this problem, the results deny the presence of any significant crowding out in the data. This inference stands up to several sensitivity tests and accords well with the body of evidence against the crowding out phenomenon in the U.S. economy.

Suggested Citation

  • Ali F. Darrat, 2000. "Do Structural Federal Budget Deficits Impact Commercial Bank Interest Rates? A Comment," Public Finance Review, , vol. 28(3), pages 187-194, May.
    • Handle: RePEc:sae:pubfin:v:28:y:2000:i:3:p:187-194
    DOI: 10.1177/109114210002800301
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    References listed on IDEAS

    as
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    6. Plosser, Charles I., 1987. "Fiscal policy and the term structure," Journal of Monetary Economics, Elsevier, vol. 20(2), pages 343-367, September.
    7. 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.
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    Cited by:

    1. Richard J. Cebula, 2002. "A contemporary investigation of causality between the primary government budget deficit and the ex ante real long term interest rate in the US," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 55(223), pages 417-435.

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