Do budget deficits affect real interest rates? A test of Ricardian equivalence theorem
This study re-examines the Ricardian Equivalence theorem (RET) by using advanced time series econometric models to investigate updated data of the U.S. budget deficits and real interest rates. We employ a multi-model approach to thoroughly investigate the properties of two time series, namely the...
保存先:
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| フォーマット: | Journal article |
| 言語: | English |
| 出版事項: |
Danubius University Press
2022
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| 主題: | |
| オンライン･アクセス: | http://scholar.dlu.edu.vn/handle/123456789/835 |
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| Thư viện lưu trữ: | Thư viện Trường Đại học Đà Lạt |
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| 要約: | This study re-examines the Ricardian Equivalence theorem (RET) by using advanced time
series econometric models to investigate updated data of the U.S. budget deficits and real interest
rates. We employ a multi-model approach to thoroughly investigate the properties of two time series,
namely the U.S. federal budget deficits (BDEF) and real interest rates (INTRATE) for the study
period from 1798 to 2009. It is found that BDEF and INTRATE are I(0) processes. The AR (2) is the
most appropriate model for the BDEF series, while the ARMA (3,2) is the proper model for the
INTRATE series. The estimated VAR (2) model, comprising the two stationary series BDEF and
INTRATE, implies that the BDEF series has no effect on the INTRATE series. The Granger-causality
test also shows that there is no direction of causality from the BDEF series to the INTRATE series.
Our findings are consistent with what the Ricardian Equivalence theorem predicts and, therefore,
support the proposition that the budget deficits are neutral. This study significantly contributes to the
extant literature of the relationship between the budget deficits and the real interest rates by applying
the multi-model approach. Furthermore, our long time series dataset enables us to make reliable
inferences. |
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