Does fiscal policy affect interest rates? : evidence from a factor-augmented panel

Salvatore Dell'Erba and Sergio Sola

This paper reconsiders the effects of fiscal policy on long-term interest rates employing a Factor Augmented Panel (FAP) to control for the presence of common unobservable factors. We construct a real-time dataset of macroeconomic and fiscal variables for a panel of OECD countries for the period 1989-2012. We find that two global factors?the global monetary and fiscal policy stances?explain more than 60 percent of the variance in the long-term interest rates. Compared to the estimates from models which do not account for global factors, we find that the importance of domestic variables in expl

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Year of publication:	2013
Authors:	Dell'Erba, Salvatore ; Sola, Sergio
Publisher:	Washington, DC : IMF
Subject:	Finanzpolitik \| Fiscal policy \| Wirkungsanalyse \| Impact assessment \| Zinsstruktur \| Yield curve \| OECD-Staaten \| OECD countries \| 1989-2012

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Extent:	Online-Ressource (43 S.) graph. Darst.
Series:	IMF working papers. - Washington, DC : IMF, ZDB-ID 2108494-4. - Vol. 13/159
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Arbeitspapier ; Working Paper ; Graue Literatur ; Non-commercial literature
Language:	English
Notes:	Includes bibliographical references Systemvoraussetzungen: Acrobat Reader Cover; Contents; I. Introduction; II. Literature Review; III. Data Description and Properties; A. Data; B. Properties; IV. Econometric Specification and Estimation Strategy; A. The Econometric Model; B. Estimation Strategy; V. Estimation Results; A. Baseline Model; B. Time Variation in the Idiosyncratic Components; C. Discussion; VI. Effects of Global Shocks; VII. Results From Different Specifications; VIII. Robustness Checks; IX. Concluding Remarks; Appendices; A. Extraction of the Factors; B. Variables; Tables; 1. Summary Statistics; 2. Cross Sectional Dependence Test; C. Tables and Figures 3. Panel Unit Root Tests4. Principal Component Analysis; 5. Baseline Estimation - Long-term Interest Rates; 6: Effects of Global Deficit Shock - Long-term Interest Rates; 7. Baseline Estimation - Real Interest Rates and Sovereign Spreads; 8. Factors' Interpretation - Long-Term Interest Rates; 9. Cross Validation - Long-Term Interest Rates; 10. Baseline Estimation - Alternative Estimation Techniques: CCE-MG; 11. Non-Linearity with Crises - Long-Term Interest Rates; 12. Non-Linearity with Public Debt - Long-Term Interest Rates; 13. Interpretation of the Global Factors - Long-term Interest Rates Figures1. Long-Term Interest Rates 1989-2012; 2. Rolling Window Estimates - Long-Term Interest Rates; 3. Country Specific Effects of an Increase in Global Deficit; 4. Determinants of the Cross-Country Dispersion of the Effects of Global Deficit; 5. Global Factors and their Macroeconomic Interpretation; References Electronic reproduction; Available via World Wide Web
ISBN:	978-1-4843-9450-2
Other identifiers:	10.5089/9781484394502.001 [DOI]
Source:	ECONIS - Online Catalogue of the ZBW

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