Journal of Economics and Finance

, Volume 34, Issue 3, pp 301–307 | Cite as

Recent evidence on the impact of government budget deficits on the ex ante real interest rate yield on Moody’s Baa-rated corporate bonds

Article

Abstract

This study provides recent empirical evidence on the impact of the federal budget deficit on the ex ante real interest rate yield on Moody’s Baa-rated corporate bonds. The study is couched within an open loanable funds model that includes the ex ante real short term real interest rate, the M1 money supply, net international capital inflows, and the unemployment rate. Using quarterly data for the period 1973.1–2007.4, two-stage least squares estimation reveals that the federal budget deficit, expressed as a percent of GDP, exercised a positive and statistically significant impact on the ex ante real interest rate yield on these corporate issues.

Keywords

Ex Ante Real Interest Rate Budget Deficits Loanable Funds Model 

JEL codes

E62 G12 

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Copyright information

© Springer Science+Business Media, LLC 2009

Authors and Affiliations

  1. 1.Shirley & Philip Solomons Eminent ScholarArmstrong Atlantic State UniversitySavannahUSA

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