Budget Deficits, Expected Inflation and Short-Term Real Interest Rates: Evidence for the U.S.

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

“…Thus, it appears that after allowing for a variety of other factors, the higher the federal budget deficit (as a percent of GDP) the higher the ex ante real interest rate yield on Baa-rated corporate bonds. This finding is consistent with a variety of empirical studies of earlier periods, including Al-Saji (1992, 1993, Barth et al (1984Barth et al ( , 1985Barth et al ( , 1988, Barth et al (1989), Cebula (1988Cebula ( , 1997, Cebula and Belton (1993), Findlay (1990), Gissey (1999), Hoelscher (1986), Johnson (1992), Saltz (1998), Tanzi (1985), and Zahid (1988).…”

Determinants of the portuguese government bond yields

“…This implies that any deterioration in the Portuguese fiscal conditions will result in the adoption of austerity measures to comply with the European Union budgetary rules, which ultimately decrease the level of government bond yields through the corresponding recessive and deflationary effects. The conclusion that deterioration in the fiscal conditions would not lead to a higher level of interest rates is also found by Kormendi (1983), Evans (1985Evans ( , 1986Evans ( and 1988, Hoelscher (1986), Makin (1986), McMillin (1986, Aschauer (1989), Darrat (1989 and, Gupta (1989), Findlay (1990), Ostrosky (1990) and Pham (2014). With regard to labour productivity, our result shows that there is a negative relationship between the labour productivity and the Portuguese government bond yields.…”

The differing effects of pre-and post-1981 federal budget deficits on tax-adjusted real interest rates

“…and Hoelscher (1986), Cebula (1988Cebula ( , 1990bCebula ( , 1990cCebula ( , 1991a, Cebula et (11, (1988,1992), (5) unanticipated deficits and the spread between short and long rates see Kim and Lombra (1989) Goff (1990) and Kim and Lombra (1989); (6) unanticipated deficits and three-month Treasury bill rates, see Makin and Tanzi (1984); (7) anticipated deficits and interest rates, see Thomas andAbderrezak (1988a, 1988b); (8) excess government deficits and long rates, see Tran and Sawhney (1988); (9) deficit announcements and interest rates, see Wachtel and Young (1987). Studies which have found empirical evidence indicating that budget deficits have no significant effect on interest rates include, Hoelscher (1983), Mascaro and Meltzer (1983), McMillin (1986), Giannaros and Kolluri (1989), Darrat (1989Darrat ( , 1990 and Findlay (1990). A review of this literature appears in Congressional Budget Office (1984), US Treasury Department (1984) and in Barth et a/.…”