Public Deficits and Borrowing Costs: The Missing Half of Market Discipline


Heinemann, Friedrich ; Winschel, Viktor


[img]
Preview
PDF
dp0116.pdf - Published

Download (208kB)

URL: http://ub-madoc.bib.uni-mannheim.de/498
URN: urn:nbn:de:bsz:180-madoc-4983
Document Type: Working paper
Year of publication: 2001
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: H62 ,
Subject headings (SWD): OECD , Schuldzins , Wirtschaftspolitik
Abstract: EMU driven interest rate convergence has led to a significant reduction of borrowing costs for some European governments in the second half of the nineties. The paper deals with the possible consequences for deficit behaviour. Although the impact of interest rates on deficits is a crucial element of the market discipline hypothesis it has widely been neglected in the literature. In the theoretical part, a standard political economic model of budgetary policy (Hettich-Winer) is adapted. It turns out that borrowing costs, measured as the interest-growth-differential, and the level of public debt should be important determinants for public deficits. The econometric part tests these predictions for a panel of OECD countries. The results indicate that there is indeed a significant impact of borrowing costs on the primary surplus. This impact is characterised by a robust asymmetry: Reactions in times of increasing borrowing costs are more pronounced than in times of relaxing conditions.
Additional information:

Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




+ Citation Example and Export

Heinemann, Friedrich ; Winschel, Viktor (2001) Public Deficits and Borrowing Costs: The Missing Half of Market Discipline. Open Access [Working paper]
[img]
Preview


+ Search Authors in

+ Download Statistics

Downloads per month over past year

View more statistics



You have found an error? Please let us know about your desired correction here: E-Mail


Actions (login required)

Show item Show item