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

UNCG Author/Contributor (non-UNCG co-authors, if there are any, appear on document)
Stuart D. Allen, Professor (Creator)
Institution
The University of North Carolina at Greensboro (UNCG )
Web Site: http://library.uncg.edu/

Abstract: This paper employs an estimating equation relating tax-adjusted real interest rates to deficits and other economic variables to examine the differing effects of pre- and post-1981 federal budget deficits on ex ante and ex post real tax-adjusted short-term interest rates over the period 1961:1-1992:2. The results for the 1961:1-1992:2 period, taking into account a shift in the linkage between the ratio of alternative measures of the deficit to potential GDP occurring in 1981:1, indicate that the ratio of both the NIPA deficit and the cyclically adjusted deficit to potential GDP have a significant effect on ex ante and ex post real tax-adjusted interest rates for the post-1981 period, but no significant effect before 1981.

Additional Information

Publication
Applied Economics, 28(1), 45-53.
Language: English
Date: 1996
Keywords
Federal budget, Monetary policy, Deficits, Interest rates