Fiscal discipline and the cost of public debt service
Subtitle: some estimates for OECD countries
By: Silvia Ardagna, Francesco Caselli, Timothy Lane.
Contributors: Caselli, Francesco, 1966-; Lane, Timothy D. 1955-; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10788; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10788.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Fiscal policy -- OECD countries.; Debts, Public -- OECD countries.; Debt service -- OECD countries.
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.
Notes: Includes bibliographical references.
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