Fiscal Shocks, Public Debt, and Long-Term Interest Rate Dynamics

The main aim of the article is to analyze the relationship between public debt and the real, long-term interest rates in the euro area member countries during 2003-2010. The first part dealt with theoretical analysis and the most important results of empirical studies concerning the relationship between public debt and the real, long-term interest rates. In the next part of article, there were examined the relationships between public debt and the real, long-term interest rates in the euro area countries by using the Vector Autoregression Model (VAR). There were estimated elasticity coefficients of the real, long-term interest rates to public debt and measured the impact strength of public debt to changes in the real, long-term interest rate in the euro area member countries using the impulse response function. This was followed by decomposition of the real, long-term interest rate to estimate the impact of public debt and the real, long-term interest rate changes on the volatility of the real, long-term interest rate in the euro area member countries.

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Concluding Remarks on Economic Policy

Saving and Investment in the Twenty-First Century ◽

10.1007/978-3-030-75031-2_13 ◽

2021 ◽

pp. 309-320

Author(s):

Carl Christian von Weizsäcker ◽

Hagen M. Krämer

Keyword(s):

Interest Rate ◽

Interest Rates ◽

Current Account ◽

Public Debt ◽

Real Interest Rate ◽

Debt Brake ◽

Long Term Stability ◽

Low Interest Rates ◽

New Thinking

AbstractThe German debt brake is not compatible with the long-term stability of the euro. “New thinking” requires that public debt and price stability are no longer opponents, but rather allies in the Keynes world of persistently low interest rates. The proposed balanced account agreement is made more concrete here: An appropriate target (real) interest rate on the global capital market is between one and 1.5% per year lower than the growth rate of the OECD plus China region. If the actual interest rate is below the target rate, the countries with current account surpluses undertake to increase their public debt periodD gradually according to a definite formula. In symmetrical fashion, if the real interest rate is “too high,” countries with current account deficits have the duty to reduce their public debt period. The rules of the balanced account agreement replace the debt brake. They are the instruments of soundfiscal policy.

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Secular stagnation in the modern world

Voprosy Ekonomiki ◽

10.32609/0042-8736-2018-11-125-141 ◽

2018 ◽

pp. 125-141 ◽

Cited By ~ 3

Author(s):

S. M. Drobyshevsky ◽

P. V. Trunin ◽

A. V. Bozhechkova

Keyword(s):

Public Debt ◽

Capital Accumulation ◽

Technological Development ◽

Japanese Economy ◽

Modern World ◽

Key Factors ◽

Destruction Process ◽

Secular Stagnation ◽

The Impact

The paper studies the factors of secular stagnation. Key factors of long-term slowdown in economic growth include the slowdown of technological development, aging population, human capital accumulation limits, high public debt, creative destruction process violation etc. The authors analyze key theoretical aspects of long-term stagnation and study the impact of these factors on Japanies economy. The authors conclude that most of the factors have significant influence on the Japanese economy for recent decades, but they cannot explain all dynamics. For Russia, on the contrary, we do not see any grounds for considering the decline in the economy since 2013 as an episode of secular stagnation.

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Infrastructure mortgage in Russia: Opportunities and prospects

Voprosy Ekonomiki ◽

10.32609/0042-8736-2019-2-114-133 ◽

2019 ◽

pp. 114-133

Author(s):

G. I. Idrisov ◽

Y. Yu. Ponomarev

Keyword(s):

Federal Government ◽

Public Debt ◽

Budget Deficit ◽

Expert Assessment ◽

Inflation Expectations ◽

Direct Impact ◽

Long Run ◽

Gdp Growth Rate ◽

Negative Effect

The article shows that depending on the goals pursued by the federal government and the available interbudgetary tools a different design of infrastructure mortgage is preferable. Three variants of such mortgage in Russia are proposed, each of which is better suited for certain types of projects and uses different forms of subsidies. According to our expert assessment the active use of infrastructure mortgage in Russia can increase the average annual GDP growth rate by 0.5 p. p. on the horizon of 5—7 years. In the long run the growth of infrastructure financing through the use of infrastructure mortgage could increase long-term economic growth by 0.9 p. p., which in 20—30 years can add 20—30% of GDP to the economy. However, the change in the structure of budget expenditures in the absence of an increase in the budget deficit and public debt will cause no direct impact on monetary policy. The increase in the deficit and the build-up of public debt will have a negative effect on inflation expectations, which will require monetary tightening for a longer time to stabilize them.

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Determinants of Inflation in Vietnam: A VECM Approach

Journal of Asian Business and Economic Studies ◽

10.24311/jabes/2015.22.4.02 ◽

2015 ◽

Vol 22 (04) ◽

pp. 26-50

Author(s):

Ngoc Tran Thi Bich ◽

Huong Pham Hoang Cam

Keyword(s):

Interest Rate ◽

Crude Oil ◽

Error Correction ◽

Budget Deficit ◽

Oil Prices ◽

Crude Oil Prices ◽

Domestic Credit ◽

Short Run ◽

The Impact

This paper aims to examine the main determinants of inflation in Vietnam during the period from 2002Q1 to 2013Q2. The cointegration theory and the Vector Error Correction Model (VECM) approach are used to examine the impact of domestic credit, interest rate, budget deficit, and crude oil prices on inflation in both long and short terms. The results show that while there are long-term relations among inflation and the others, such factors as oil prices, domestic credit, and interest rate, in the short run, have no impact on fluctuations of inflation. Particularly, the budget deficit itself actually has a short-run impact, but its level is fundamentally weak. The cause of the current inflation is mainly due to public's expectations of the inflation in the last period. Although the error correction, from the long-run relationship, has affected inflation in the short run, the coefficient is small and insignificant. In other words, it means that the speed of the adjustment is very low or near zero. This also implies that once the relationship among inflation, domestic credit, interest rate, budget deficit, and crude oil prices deviate from the long-term trend, it will take the economy a lot of time to return to the equilibrium state.

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