Budget Deficits Expected Inflation and Short-Term Real Interest Rates: Evidence for the U.S. |
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Authors: | David W. Findlay |
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Affiliation: | Colby College |
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Abstract: | This paper examines a number of issues concerning the determination of short-term real interest rates. We include actual inflation and several measures of expected inflation in order to determine whether empirical results are sensitive to the choice of the inflation variable. The results strongly suggest that the estimated coefficients are unaffected by the choice of the interest rate variable and, implicitly, the inflation variable. Deficits are not found to have a positive effect on all measures of the dependent variable, while increases in the real money supply and the inflation variables depress real interest rates. [311] |
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