Budget deficits and interest rates a bounds testing approach evidence from New Zealand
McKenzie, Paxton L R
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Cite this item:
McKenzie, P. L. R. (2000, October). Budget deficits and interest rates a bounds testing approach evidence from New Zealand (Dissertation, Bachelor of Commerce with Honours). Retrieved from http://hdl.handle.net/10523/1224
Permanent link to OUR Archive version:
http://hdl.handle.net/10523/1224
Abstract:
This empirical study investigates the impact of budget deficits on long-term interest rates in a New Zealand context. Two measures of inflationary expectations are generated, one using the low frequency component of the CPI, provided by the Hodrick-Prescott filter, and the other using a survey based measure. To overcome unit root pre-testing uncertainty, a 'bounds testing approach' is employed to test for cointegration. A single-equation error correction model is then used to test the relationship. Evidence is found in favour of a positive long run relationship between budget deficits and long-term interest rates, suggesting a 'crowding out' effect.
Date:
2000-10
Degree Name:
Bachelor of Commerce with Honours
Degree Discipline:
Economics
Pages:
61
Keywords:
budget deficits; long-term interest rates; New Zealand; inflationary expectations; single-equation error correction model; crowding out effect
Research Type:
Dissertation
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- Economics [318]
- Dissertation - Honours [188]