The Determinants of the Tax-Adjusted Real Interest Rate

UNCG Author/Contributor (non-UNCG co-authors, if there are any, appear on document)
Stuart D. Allen, Professor (Creator)
The University of North Carolina at Greensboro (UNCG )
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Abstract: A reduced-form real interest rate equation, derived from an IS-LM-AS model, is estimated to examine the relationship between real interest rates, the federal debt, supply shocks, monetary policy and other variables. The federal debt coefficient is consistently positive and significantly related to the real interest rate in the levels form of the equation. When the equation is first-differenced to eliminate any problem of autocorrelation and intercept instability, the evidence shows that both the federal debt and the supply shock coefficients are positive and significant. The coefficient estimates of the first-difference equations are stable and robust to the estimated period.

Additional Information

Journal of Macroeconomics, 14(1), Winter, 15-32.
Language: English
Date: 1992
Interest, Tax, Finance, Economics, Federal debt, Monetary policy

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