Contents of the volume

2019, Volume 72 - Issue 2

ISSN: 2499-8265
RSS feed citation: At RePEc
Publication date: 02 May 2019

THE FELDSTEIN-HORIOKA PUZZLE AND THE GLOBAL FINANCIAL CRISIS: EVIDENCE FROM SOUTH AFRICA USING ASYMMETRIC COINTEGRATION ANALYSIS

Andrew Phiri

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THE CAUSAL IMPACT OF STOCK MARKET DEVELOPMENT ON ECONOMIC DEVELOPMENT IN THE UAE: AN ASYMMETRIC APPROACH

Abdulnasser Hatemi-J

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THE IMPACT OF THE DIVIDEND TAX IN SOUTH AFRICA: A DYNAMIC CGE MODEL APPROACH

Lumengo Bonga-Bonga, Jean Luc Erero

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MODELING THE VOLATILITY OF EXCHANGE RATE CURRENCY USING GARCH MODEL

Chaido Dritsaki

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AN EMPIRICAL ANALYSIS FOR THE US OF THE EFFECTS OF GOVERNMENT BUDGET DEFICITS ON THE EX ANTE REAL INTEREST RATE YIELDS ON THIRTY-YEAR AND TWENTY-YEAR TREASURY BONDS

Richard J. Cebula, Maggie Foley

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ACKNOWLEDGEMENT TO REFEREES

Amedeo Amato

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Genoa Chamber of Commerce
Economia Internazionale / International Economics

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Corresponding author

Richard J. CEBULA, Jacksonville University – Davis College of Business, Jacksonville, Florida, USA

Co-authors

Maggie FOLEY, Jacksonville University, Davis College of Business, Jacksonville, Florida, USA

An Empirical Analysis for the US of the Effects of Government Budget Deficits on the ex ante Real Interest Rate Yields on Thirty-Year and Twenty-Year Treasury Bonds

Pages

231-252

Abstract

This study empirically investigates the impact of federal government budget deficits on the ex ante real interest rate yield on thirty-year and twenty-year U.S. Treasury bonds. After allowing for the exchange rate and a  variety of other control variables, it is found that autoregressive two stage least squares estimations for the post-Bretton Woods era reveal that the ex ante real interest rate yields on both of these bonds have been an increasing function of the federal budget deficit. Accordingly, since long-term U.S. Treasury bond issues compete directly with household bond issues (such as home mortgages) as well as corporate bond issues in the financial marketplace, legislators and other policy-makers should circumspect about the potential implications of actions that increase the magnitude of budget deficits. This is because higher budget deficits are very likely to elevate longer-term ex ante real interest rates affecting household purchases of durable goods, such as housing and business investment in new plant and equipment and technology and hence are likely to adversely influence long-term macro-economic growth through crowding-out effects.

JEL classification

E43, E62, H62

Keywords

Budget Deficits, Ex Ante Real Interest Rate Yields, Thirty-Year Treasury Bonds, Twenty-Year Treasury Bonds, Monetary Policy, Crowding Out

Index

  1. Introduction
  2. The initial open-economy loanable funds framework
  3. The initial empirical model and the data
  4. Empirical estimation results
  5. An alternative expected inflation formulation
  6. Concluding observations

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