Interest Rates And Budget Deficits

The book examines the relationship between interest rates and budget deficits in 11 developed countries. While there is a belief that high budget deficits cause high interest rates, there is no conclusive evidence to support this. The results suggest that individual factors in each country play a significant role in determining interest rates, rather than a general trend across all countries.

There is widespread belief that the high interest rates of the 1980s and 1990s in the developed world have been caused by high budget deficits. Yet, there is no conclusive evidence to support such a belief. This book systematically examines this and other questions relating to the behaviour of real interest rates in 11 developed countries. The results show that generalizations across the countries can be hazardous and strongly suggests that factors specific to individual countries are still of vital importance.