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Fiscal policy and interest rates: the role of financial and economic integration
Claeys, Peter Gunther; Moreno Serrano, Rosina; Suriñach Caralt, Jordi
It is commonly believed that a fiscal expansion raises interest rates. However, these crowding out effects of deficits have been found to be small or non-existent. One explanation is that financial integration offsets interest rate differentials on globalised bond markets. This paper measures the degree of integration of government bond markets, using spatial modelling techniques to take this spillover on financial markets into account. Our main finding is that the crowding out effect on domestic interest rates is significant, but is reduced by spillover across borders. This spillover is important in major crises or in periods of coordinated policy actions. This result is generally robust to various measures of cross-country linkages. We find spillover to be much stronger among EU countries.
Política fiscal
Macroeconomia
Cicle de vida del producte
Deute públic
Anàlisi d'impacte econòmic
Inversions
Fiscal policy
Macroeconomics
Product life cycle
Public debt
Economic impact analysis
Investments
cc-by-nc-nd, (c) Claeys et al., 2008
http://creativecommons.org/licenses/by-nc-nd/3.0/
Working Paper
Universitat de Barcelona. Institut de Recerca en Economia Aplicada Regional i Pública
         

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