Fiscal discipline and the cost of public debt service

Description

"We use a panel of 16 OECD countries over several decades to investigate the effects of government debts and deficits on long-term interest rates. In simple static specifications, a one-percentage-point increase in the primary deficit relative to GDP increases contemporaneous long-term interest rates by about 10 basis points. In a vector autoregression (VAR), the same shock leads to a cumulative increase of almost 150 basis points after 10 years. The effect of debt on interest rates is non-linear: only for countries with above-average levels of debt does an increase in debt affect the interest rate. World fiscal policy is also important: an increase in total OECD-government borrowing increases each country's interest rates. However, domestic fiscal policy continues to affect domestic interest rates even after controlling for worldwide debts and deficits"--National Bureau of Economic Research web site.

Subjects

Links

• http://cep.lse.ac.uk/pubs/download/dp0670.pdf
• Abstract with link to full-text PDF report
• URL
• URL

Other Editions

• Fiscal discipline and the cost of public debt service: some estimates for OECD countriesElectronic resourceCentre for Economic Performance, London School of Economics and Political Science2005-01-01
• Fiscal discipline and the cost of public debt serviceEuropean Central Bank2004-01-01
• Fiscal discipline and the cost of public debt serviceEuropean Central Bank2004-01-01
• Fiscal discipline and the cost of public debt serviceNational Bureau of Economic Research2004-01-01
• Fiscal discipline and the cost of public debt serviceElectronic resourceNational Bureau of Economic Research2004-01-01