Fiscal Policy, Trigger Points and Interest Rates: Additional Evidence From the U.S.
University of Innsbruck
University of Innsbruck - Department of Public Finance
August 23, 2011
We empirically investigate whether the relationship between interest rates and public deficits/debt may be nonlinear for the U.S. Using threshold estimation, we find evidence of level-dependent effects on interest rates, implying a significant effect of projected deficits and debt in the U.S. only if the deficit surpasses approximately 5% of GDP.
Number of Pages in PDF File: 31
Keywords: public debt, public deficit, long-term interest rates, nonlinearity, threshold models, Domar model
JEL Classification: E43, E62, H62working papers series
Date posted: November 7, 2011
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