Budget Deficits Expected Inflation and Short-Term Real Interest Rates: Evidence for the U.S.

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

“…Thus, it appears that after allowing for a variety of other factors, the higher the federal budget deficit (as a percent of GDP) the higher has been the nominal interest rate yield on 30 year fixed-rate home mortgages. This finding is consistent with a variety of empirical studies of earlier periods, including Al-Saji (1992, 1993, Barth, Iden and Russek (1984, Barth, Iden, Russek, and Wohar(1989), Cebula (1988Cebula ( , 1997, Cebula and Belton (1993), Cebula and Cueller (2010), Findlay (1990), Gissey (1999), Hoelscher (1986), Johnson (1992), Cebula & Saltz (1998), Tanzi (1985), and Zahid (1988).…”

“…The impact of government budget deficits on interest rates has been studied extensively (Al-Saji, 1992, 1993Barth, Iden & Russek, 1984Cebula, 2005;Cebula & Cueller, 2010;Cukierman & Meltzer, 1989;Feldstein & Eckstein, 1970;Findlay, 1990;Hoelscher, 1983Hoelscher, , 1986Holloway, 1988;Johnson, 1992;Ostrosky, 1990;Cebula & Saltz, 1998;Swamy, Kolluri, & Singamsetti, 1990;Tanzi, 1985;Zahid, 1988)). These studies typically are couched within IS-LM or loanable funds models or variants thereof.…”

Is Real Depreciation or More Government Deficit Expansionary? The Case of Slovenia

“…Feldstein (1982), Hoelscher (1986), Cebula (1997), Cebula and Cuellar (2010), Cebula (2014aCebula ( , 2014b, Cebula, Angjellari-Dajci, and Foley (2014) and others maintain that more government deficit/debt raises real interest rates and tends to crowd out spending by households and businesses. However, studies by McMillin (1986), Gupta (1989), Darrat (1989Darrat ( , 1990, Findlay (1990), and Ostrosky (1990) argue that more government deficit/debt would not raise the interest rate.…”

Determinants of the Government Bond Yield in Spain: A Loanable Funds Model

“…Feldstein [1], Hoelscher [2], Wachtel and Young [3], Zahid [4], Thomas and Abderrezak [5], Miller and Russek [6], Raynold [7], Cebula [8], Vamvoukas [9], Ewing and Yanochik [10], and Saleh and Harvie [11] maintained that there is a positive relationship between the government deficit/debt and the interest rate. However, Kormendi [12], Hoelscher [13], Aschauer [14], Makin [15], McMillin [16], Evans [17][18][19], Gupta [20], Darrat [21,22], Findlay [23], and Ostrosky [24] indicated that more government deficit/debt would not lead to a higher interest rate. Barro [25][26][27] argued that more government deficit/debt would not increase aggregate demand because people would save more in order to pay more future tax to pay off government debt.…”