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Oeconomia Copernicana

THE IMPACT OF PUBLIC DEBT ON THE LONG-TERM INTEREST RATES IN THE EURO AREA MEMBER COUNTRIES DURING 2003-2010
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THE IMPACT OF PUBLIC DEBT ON THE LONG-TERM INTEREST RATES IN THE EURO AREA MEMBER COUNTRIES DURING 2003-2010

Authors

  • Piotr Misztal Politechnika Radomska

DOI:

https://doi.org/10.12775/OeC.2011.011

Keywords

budget debt, bond interest rates, VAR model

Abstract

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 wereexamined 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 impactstrength 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.

References

Ardagna S., Caselli F., Lane T. (2004), Fiscal discipline and the cost of public debt service: Some estimates for OECD countries, „B.E. Journal of Macroeconomics: Topics in Macroeconomics”, No. 7.

Comley B., Anthony S., Ferguson B. (2002), The effectiveness of fiscal policy in Australia - selected issues, „Economic Roundup”, Winter.

Engen E., Hubbard G. (2004), Federal Government Debts and Interest Rates, NBER Working Paper No. 10681

Evans Ch., Marshall D. (2007), Economic Determinants of the Nominal Treasury Yields Curve, „Journal of Monetary Economics”, Vol. 54(7).

Ford R., Laxton D. (1999), World Public Debt and Real Interest Rates, „Oxford Review of Economic Policy”, Vol. 15, No. 2.

Laubach T. (2009), New Evidence on the Interest Rate Effects of Budget Deficits and Debt, „Journal of the European Economic Association”, Vol. 7(4).

Marattin L., Salotti S. (2010), The Euro-dividend: public debt and interest rates in the Monetary Union, Dipartimento di Matematica per le Decisioni, Universita' degli Studi di Firenze, No. 2010-04.

Paesani P., Strauch R., Kremer M. (2006), Public Debt and Long-Term Interest rates. The Case of Germany, Italy and the USA, European Central Bank Working Paper Series, No. 656.

World Economic Outlook (2010), International Monetary Fund, Washington.

Yan Y. H., Brittle S. (2010), Reconsidering the Link Between Fiscal Policy and Interest Rates in Australia, The Treasury Working Paper, No. 04.

Oeconomia Copernicana

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Published

2011-09-01

How to Cite

1.
MISZTAL, Piotr. THE IMPACT OF PUBLIC DEBT ON THE LONG-TERM INTEREST RATES IN THE EURO AREA MEMBER COUNTRIES DURING 2003-2010. Oeconomia Copernicana. Online. 1 September 2011. Vol. 2, no. 3, pp. 23-42. [Accessed 2 July 2025]. DOI 10.12775/OeC.2011.011.
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Vol. 2 No. 3 (2011)

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