World Public Debt and Real Interest Rates

Author/Editor:

Robert Ford ; Douglas Laxton

Publication Date:

March 1, 1995

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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.

Series:

Working Paper No. 1995/030

Subject:

Capital markets Financial markets Financial services Fiscal policy Government debt management Public debt Public financial management (PFM) Real interest rates

Notes:

The developed countries are Belgium, Canada, Denmark, Germany, United Kingdom, Japan, Netherlands, United States, and Switzerland.

English

Publication Date:

March 1, 1995

ISBN/ISSN:

9781451844887/1018-5941

Stock No:

WPIEA0301995

Pages:

34

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