Impact of Fiscal Deficits on Real Interest Rates

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Authors

  • Naveen Joseph Thomas
     ,IN

Keywords:

Fiscal Deficit, Interest Rate

Abstract

The study tries to uncover the relationship between fiscal deficits and real interest rates using the Vector Auto Regressive Model. The relationship is estimated using three variants of nominal interest rates. It results suggest that the direction of causality runs from real interest rates to fiscal deficit. Further, there is no financial crowding out effect in case of India .Hence, the argument of public expenditure crowding out private investment by making borrowing more expensive cannot be used as argument for cutting down on the much needed investments in various public infrastructure. The findings also indicate that it is difficult to isolate the effect of fiscal deficit from other influences in the economy.

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Published

2018-05-23

How to Cite

Joseph Thomas, N. (2018). Impact of Fiscal Deficits on Real Interest Rates. Journal of Business Thought, 7, 63–88. Retrieved from https://informaticsjournals.co.in/index.php/jbt/article/view/21330

Issue

Volume 7, April 2016 - March 2017

Section

Articles

License

All the articles published in JBT are distributed under a creative commons license. The journal allows the author(s) to hold the copyright of their work (all usages allowed except for commercial purpose).
Received 2018-05-23
Accepted 2018-05-23
Published 2018-05-23

 

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