scholarly journals Public Debt, Economic Growth and the Real Interest Rate: A Panel VAR Approach to EU and OECD Countries

2019 ◽  
Vol 52 (12) ◽  
pp. 1377-1394 ◽  
Author(s):  
Jan Jacobs ◽  
Kazuo Ogawa ◽  
Elmer Sterken ◽  
Ichiro Tokutsu
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Public Debt ◽  
Real Interest Rate ◽  
Oecd Countries ◽  
Panel Var ◽  
The Real

scholarly journals Government borrowing as a Ponzi scheme: the case of Bangladesh

2021 ◽  
Vol 10 (1) ◽  
pp. 81-86
Author(s):  
Syed Yusuf Saadat
Keyword(s):  
Economic Growth ◽  
Growth Rate ◽  
Interest Rate ◽  
Real Interest Rate ◽  
Government Debt ◽  
Economic Growth Rate ◽  
The Real ◽  
Ponzi Scheme ◽  
The Government

This study investigates whether government borrowing can be likened to a Ponzi scheme which will allow the government to roll-over its debt perpetually. The results show that, on the basis of the condition of maintaining real economic growth rate above and beyond the real interest rate on government debt, it will not be possible to sustain a perpetual Ponzi scheme of all four types of National Savings Certificates in Bangladesh. The government’s debt may be rolled over perpetually for two types of National Savings Certificates, following the condition outlined in Ball, et al. (1998), or for three types of National Savings Certificates following the condition outlined in Mehrotra (2017). 

scholarly journals Why House Prices Increase in the COVID-19 Recession: A Five-Country Empirical Study on the Real Interest Rate Hypothesis

Urban Science ◽  
2021 ◽  
Vol 5 (4) ◽  
pp. 77
Author(s):  
Chung Yim Yiu
Keyword(s):  
Economic Growth ◽  
New Zealand ◽  
Interest Rate ◽  
Fixed Effects ◽  
Real Interest Rate ◽  
House Prices ◽  
House Price ◽  
The United States ◽  
Housing Affordability ◽  
The Real

There are substantial rebounds in house prices in many developed economies after the outbreak of COVID-19. It provides a special opportunity to test the real interest rate hypothesis empirically as a “synchronized” price rebound implies a common cause of house price hikes across the economies. This study conducts a panel regression analysis on five economies, namely Australia, Canada, European Union, New Zealand, the United Kingdom, and the United States of America, to test the hypothesis. The data range from 2017Q1 to 2021Q1. The results confirm that the real interest rate imposes a negative and significant effect on house price growth rate after controlling for economic growth factors, unemployment factors, and cross-country fixed effects. The empirical result of the five housing markets shows that a 1% fall in the real interest rate caused a 1.5% increase in house prices, ceteris paribus, in this period. It also provides casual evidence refuting the economic growth hypothesis and the migrant hypothesis in New Zealand. The results provide far-reaching practical implications on housing policy and on the ways forward to solve housing affordability problems.

scholarly journals THE EFFECT OF MONETARY POLICY ON UNEMPLOYMENT RATE IN INDONESIA

2021 ◽  
Vol 6 (1) ◽  
pp. 1
Author(s):  
Hafiansyah Mahadika ◽  
Wisnu Wibowo
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Unemployment Rate ◽  
Real Interest Rate ◽  
Real Exchange Rates ◽  
Series Data ◽  
The Real ◽  
The Impact

This study aims to determine the influence of monetary policy on the unemployment rate in Indonesia. Unemployment is one of the fundamental problems in the economy. The unemployment problem can be overcome by monetary policy. This study used time series data with the period 1975-2016 using real money demand, economic growth, real interest rates, and real exchange rates as independent variables, and the unemployment rate as the dependent variable. The data used in this study is secondary data obtained from the World Bank. The method used is ARDL (Autoregressive Distributed Lag) which can change a static economic theory to be dynamic by taking into account the role of time explicitly. The results show that in the long run the probability value of the economic growth variable is below the 5% significance level which indicates that economic growth had a negative and significant effect on the unemployment rate. In the short run, the real interest rate, the real interest rate at lag 1, economic growth at lag 1 and lag 3, and the real exchange rate at lag 1 had a negative and significant effect on the unemployment rate. This indicates that the impact of monetary policy on the unemployment rate is temporary.Keywords: Unemployment Rate, Monetary Policy, ARDL.JEL : E24, E52, E61.

scholarly journals The Rise of Services and Balanced Growth in Theory and Data

2020 ◽  
Vol 12 (4) ◽  
pp. 109-146 ◽  
Author(s):  
Miguel León-Ledesma ◽  
Alessio Moro
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Structural Transformation ◽  
Real Interest Rate ◽  
Marginal Product ◽  
Balanced Growth ◽  
The Real ◽  
Investment Rates ◽  
Cross Country ◽  
Real Investment

We investigate the effect of structural transformation on the process of economic growth. Using a two-sector growth model we show that, in addition to Baumol’s cost disease, structural transformation from goods to services generates other predictions that are in line with cross-country growth facts: an increase in the real investment rate, a decline in the real interest rate and the marginal product of capital, and an acceleration of investment-specific technological change as the share of services increases. The model calibrated to US data can account for the elasticity of real investment rates to the share of services measured in cross-country data. (JEL E22, E23, E43, L16, O33, O41, O47)

scholarly journals Ricardian Equivalence revisited: introductory notes

2022 ◽  
Vol 42 (1) ◽  
pp. 113-127
Author(s):  
Maria Isabel Busato
Keyword(s):  
Interest Rate ◽  
Public Debt ◽  
Real Interest Rate ◽  
Final Section ◽  
Government Expenditure ◽  
Equivalence Theorem ◽  
Ricardian Equivalence ◽  
Real Effect ◽  
The Real ◽  
Tax Reduction

ABSTRACT These notes aim to revisit the debate, the model, the results, and main objections to the validity of the Ricardian Equivalence Theorem as presented in Barro (1974). It is intended to explore his thesis that tax and debt are equivalent and have no real effect on perceived wealth, demand, the real interest rate or on the economy. The thesis refers to the analysis of the ways of financing debt at a given level of government expenditure and does not address the effects of an expansion of this volume of spending, nor it specifically analyzes the effects of an increase in public debt due to a tax reduction policy. After this presentation, the thesis is debated, consolidating some of the premises that are necessary to validate it. The purpose of the paper is to explore the first round of debates on the theme, explaining the restrictions to which the Barro-Ricardo Theorem or the Ricardian Equivalence Theorem is subject, based on the publications by Barro (1976), Buchanan (1976) and Feldstein (1976), all of them within the ‘realm’ of economic orthodoxy. The final section presents some remarks and an analysis of Barro’s later work (1989 and 1996).

scholarly journals Government Expending, Real Interest Rate, and Economic Growth in Nepal

2018 ◽  
Vol 41 (3-4) ◽  
pp. 41-57
Author(s):  
Arbind Chaudhary ◽  
Mahesh Acharya
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Causal Relationship ◽  
Real Interest Rate ◽  
Trade Openness ◽  
Government Expenditure ◽  
Real Income ◽  
The Real ◽  
Long Run ◽  
Average Rainfall

This paper aims to obtain a linear and causal relationship between government expenditure and real interest rate to the economic growth of Nepal for 1975-2015. The applied ARDL cointegration technique yields a long-run association among the variables. Furthermore, the variables: government expenditure, real interest rate, and other control variables-average rainfall and trade openness are established as long-run elements to the national income. The real interest rate has a substitution effect on the Nepalese household sector, hence it hurts the real income. However, trade openness, public expenditure, and average rainfall are recorded as the short-run determinants. Similarly, the study also explores the existence of a bidirectional causal relationship between government expenditure and real income.

scholarly journals LESSONS FROM ARGENTINA’S CURRENCY BOARD SYSTEM FOR INDONESIA

2003 ◽  
Vol 5 (3) ◽  
pp. 122-157
Author(s):  
Agus Fadjar Setiawan
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Interest Rates ◽  
Real Interest Rate ◽  
Inflation Rate ◽  
Nominal Exchange Rate ◽  
Currency Board ◽  
The Real ◽  
The Us ◽  
Board System

The purpose of this study is to attempt to draw lessons from Argentina’s Currency Board System (CBS) for Indonesia. Moreover, this study reviews Argentina’s economic performance before and after the implementation of the CBS, through an examination of some macroeconomic indicators namely real GDP growth, interest rates, money and inflation, as well as fiscal condition. The first three indicators are compared to the US, as the reserve-currency country, and Indonesia. The last indicator is compared to Indonesia only.In summary, the study found that after the adoption of the CBS the economic growth of Argentina substantially improved. The real interest rate tended to converge with the US interest rate, and the inflation rate that is linked to money growth was brought down to a low level close to the US inflation rate. However, this study also produced some more important findings. First, the long-run sustainability of Argentina’s economic growth with its CBS is questionable. Second, the real interest rate convergence was broken due to high default risk and deflationary expectations in Argentina. Third, low inflation later on turned to deflation as a consequence of the overvalued nominal exchange rate. Fourth, lack of sound fiscal policy and weak fiscal performance undermined the CBS regime. Finally, the study suggests that the absence of a lender of last resort is an institutional weakness of the CBS.

How Does Public Debt Affect the Indian Macroeconomy? A Structural VAR Approach

2020 ◽  
Vol 14 (3) ◽  
pp. 253-284
Author(s):  
Ranjan Kumar Mohanty ◽  
Sidheswar Panda
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Public Debt ◽  
Positive Impact ◽  
Decomposition Analysis ◽  
Structural Var ◽  
Adverse Impact ◽  
Mixed Effect ◽  
Domestic Debt ◽  
The Impact

The study investigates the macroeconomic effects of public debt in India during 1980–2017 using a structural vector autoregression framework. The objective is to examine the impact of public debt on the interest rate, investment, inflation and economic growth in India. The results of the impulse response functions show that public debt has an adverse impact on economic growth but a positive impact on the long-term interest rate in the short run and a mixed effect (both negative and positive) on investment and inflation. We also find that domestic debt has a more adverse impact on the economy than external debt. The estimated variance decomposition analysis finds that much of the variation in selected macro variables are explained by public debt and growth in India. This study suggests that public debt especially domestic debt should be controlled and channelled productively to have a favourable impact on the economy. JEL Classification: H63, O40, C40

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