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Fiscal Policy, Trigger Points and Interest Rates: Additional Evidence From the U.S.Gerhard ReitschulerUniversity of Innsbruck Rupert SendlhoferUniversity of Innsbruck - Department of Public Finance August 23, 2011 Abstract: 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, H62 working papers seriesDate posted: November 7, 2011Suggested Citation |
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