The Impact of Federal Budget Deficits on Long¬Term Nominai Interest Rates in the U.S.: New Evidence and an Updating Using Cointegration and Granger-Causality Tests, 1973. 2-1993.3

This study investigates the impact of federal government budget deficits on nominal long-term interest rates during the post-Bretton Woods era in the United States. The analysis conducts cointegration and Granger_causality tests within an open-economy loanable funds framework The empirical results indicate, among other things, that the nominal long-term lnterest rate and the federal budget deficit are cointegrated and that the federal budget deficit acts to raise the nominal long-term rate of interest over the 1973-1993 study period.