World Public Debt and Real Interest Rates
March 1, 1995
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Summary
Real interest rates appear to have risen in virtually all industrialized countries relative to levels that prevailed in the 1960s and 1970s. There is increasing concern that this may reflect higher public debt, which is crowding out private sector activity. Over the last two decades, there has also been increasing international capital market integration. This suggests that interest rates in any country may be sensitive to global fiscal developments. This paper estimates the effects of aggregate fiscal developments in the industrialized world on real interest rates in nine industrial countries. The results imply that the increase in OECD-wide government debt since the late 1970s was a major factor explaining the rise in real interest rates.
Subject: Capital markets, Financial markets, Financial services, Fiscal policy, Government debt management, Public debt, Public financial management (PFM), Real interest rates
Keywords: average Real Interest Rate, Capital markets, coefficient estimate, debt variable, Global, Government debt management, interest rate determination, post real interest rates, real interest rate, real interest rate trend, Real interest rates, right, weighted average real interest rate, world real interest rate, WP
Pages:
34
Volume:
1995
DOI:
Issue:
030
Series:
Working Paper No. 1995/030
Stock No:
WPIEA0301995
ISBN:
9781451844887
ISSN:
1018-5941
Notes
The developed countries are Belgium, Canada, Denmark, Germany, United Kingdom, Japan, Netherlands, United States, and Switzerland.
