Recent Evidence on the Impact of Federal Government Budget Deficits on the Nominal Long Term Mortgage Interest Rate in the U.S.

International Journal of Finance and Accounting Studies Vol. 1 No. 1; April 2013

6 Pages Posted: 1 Oct 2013

See all articles by Richard J. Cebula

Richard J. Cebula

Armstrong Atlantic State University; Jacksonville University (Florida)

Maggie C. Foley

Jacksonville University (Florida)

Date Written: April 30, 2013

Abstract

This study provides recent empirical evidence on the impact of the federal budget deficit on the nominal long term mortgage interest rate yield in the U.S. The study is couched within a loanable funds model that includes the cost to financial institutions of borrowing funds, expected inflation, and the percentage growth rate of real GDP, as well as the federal budget deficit expressed as a percent of GDP. Using annual data for the period 1970-2008, two-stage least squares autoregressive estimation reveals that the federal budget deficit, expressed as a percent of GDP, exercised a positive and statistically significant impact on the long term mortgage interest rate yield.

Keywords: mortgage interest rate, budget deficits, loanable funds model, two stage least squares

Suggested Citation

Cebula, Richard J. and Foley, Maggie C., Recent Evidence on the Impact of Federal Government Budget Deficits on the Nominal Long Term Mortgage Interest Rate in the U.S. (April 30, 2013). International Journal of Finance and Accounting Studies Vol. 1 No. 1; April 2013. Available at SSRN: https://ssrn.com/abstract=2333054

Richard J. Cebula (Contact Author)

Armstrong Atlantic State University ( email )

11935 Abercorn Street
Savannah, GA 31419
912-921-3781 (Phone)
912-921-3782 (Fax)

Jacksonville University (Florida) ( email )

Jacksonville, FL 32211
United States

Maggie C. Foley

Jacksonville University (Florida) ( email )

Jacksonville, FL 32211
United States

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