Fiscal shocks, public debt, and long-term interest rate dynamics

Marattin, Luigi ; Paesani, Paolo ; Salotti, Simone (2011) Fiscal shocks, public debt, and long-term interest rate dynamics. Bologna: Dipartimento di Scienze economiche DSE, p. 36. DOI 10.6092/unibo/amsacta/4500. In: Quaderni - Working Paper DSE (740). ISSN 2282-6483.
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Abstract

Public finances worldwide have been severely hit by the 2008-2009 Great Recession, stimulating the debate on the consequences of growing fiscal imbalances. Building on Paesani et al. (2006), this paper focuses on the USA, Germany and Italy over the 1983-2009 period and studies the effects of fiscal shocks and government debt accumulation on long-term interest rates, both nationally and across borders. Based on a theoretical framework, the empirical analysis disentangles permanent and transitory components of interest rates dynamics finding that sustained debt accumulation leads, at least temporarily, to higher long-term interest rates. This is particularly true for the Italian case. There is also evidence of significant cross-country linkages, mainly between Italy and the USA.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Marattin, Luigi
Paesani, Paolo
Salotti, Simone
Keywords
Public debt, long-term interest rates, cointegration, common trends
Subjects
ISSN
2282-6483
DOI
Deposit date
28 Jan 2016 13:21
Last modified
28 Jan 2016 13:21
URI

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