Beginning in 1987, Thailand experienced lower real interest rates, an investment boom, and rapid economic growth. We investigate whether these lower real rates were caused by conservative fiscal policy. Using data from the years 1980-94, we test between the Keynesian theory that smaller budget...

Some theory suggests that budget deficits and greater public spending will raise real interest rates and crowd-out private investment; other theory suggests there is no effect. We attempt to test this in the Thai economy between the years 1978 and 1994. We find that budget deficits did appear to...