Do Budget Deficits Raise Interest Rates? A Survey of the Empirical Literature

摘要: Do government budget deficits raise interest rates and thus “crowd out” private investment? This question has been the topic of a multitude empirical studies, which proposed to evaluate impact financing activity. We survey theory some results. Traditional theories either support having positive or neutral effect on rates. Various tests these propositions yield diverse results, one can find all conclusions – that raise, decrease do not Also, there is little attempt ground their assumption rising result in crowding out borrowing investment. The problem with many studies begins narrow theoretical underpinnings are driven by assumptions resource constraints, exogenous money supply, constraints. Alternatively, models derive economics from demand side determining have transmission mechanisms missing traditional may explain econometric testing incongruities. Such take account multi-asset markets, investment accelerators consider alternative causality - deficits. They emphasize financial market instruments, investor behavior, relationship between treasury central bank fiscal monetary policy. As result, such provide richer understanding interaction institutional setting.