Public Choice

, Volume 60, Issue 1, pp 87–92 | Cite as

Budget deficits and interest rates in the United States

  • Kanhaya L. Gupta

Concluding remarks

In this paper, an attempt has been made to reexamine the effect of budget deficits in the United States on interest rates. Unlike the previous studies which use only one definition of the dependent variable, we have used all three, namely, the nominal and the ex-post and the ex-ante real interest rate. Further, unlike previous studies, we considered both short-term and long-term interest rates. Our results provide absolutely no support for the proposition that federal deficits affect interest rates and thus contradict the recent findings by Cebula (1987) and Kolluri and Giannaros (1987). Finally, the paper provides some further support for the ‘inverted’ Fisher hypothesis proposed by Carmichael and Stebbing (1983).


Interest Rate Public Finance Real Interest Rate Budget Deficit Fisher Hypothesis 
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Copyright information

© Kluwer Academic Publishers 1989

Authors and Affiliations

  • Kanhaya L. Gupta
    • 1
  1. 1.Department of EconomicsUniversity of AlbertaEdmontonCanada

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