Deficts and interest rates: A nonparamertic analysis

Treasury bill rates and treasury cash reserves

“…These earlier studies had another common result, namely the lack of a significant relationship between deficits and short-term interest rates. However, Gissy [1996Gissy [ , 1999 demonstrated that studies on the relationship between deficits and short-term interest rates generally utilized high frequency data where the accounting identity, called the budget deficit, rarely corresponded to the level of net Treasury borrowing. A more important observation concerned the relationship between their movements which often run in opposite directions.…”

Budget deficits and interest rates in Germany

“…In this vein, the present study applies basic cointegration techniques to investigate these variables for the case of Germany, whose budget deficit effects have been studied a number of times [Evans, 1987;Saltz, 1993], although not so extensively as have those for other nations, such as the U.S. [Barth, Iden, and Rnssek, 1984;1985;Cebula, 1988;Hoelscher, 1986;Gissey, 1996;1999] and the UK [Saltz, 1992;A1-Saji, 1992;1993]. The framework is an open-economy, loanable funds model.…”