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When the economy is operating near capacity, government borrowing to finance an increase in the deficit causes interest rates to rise.
The sellers of the government securities obtain cash that they deposit in the banks, thus increasing the cash reserves of the banks and enabling them to expand credit to private borrowers; this in turn causes interest rates in the private sector to fall and the terms of credit to become easier.
The Wald test also establishes that the budget deficit Granger causes interest rates.
The budget deficit causes interest rates to rise, which supports the Keynesian view.
Similar(55)
This can drag on for weeks, causing interest to wane.
These changes moved convertibility further from currency board orthodoxy and caused interest rates to skyrocket.
Still, the error had probably caused interest rates to be kept too high for too long.
That will turn deflation to inflation, strengthen the dollar, balance budgets and cause interest rates to rise again.
Thomas Cook is carrying £900m of debt, enough to cause interest payments to consume about 40% of operating profits this year.
This began with the announcement of the euro's introduction at the 1995 EU Summit in Madrid, which caused interest rates to tumble.
Nostalgia and a rapidly growing Hispanic population, that is mostly of Mexican descent, is causing interest in the music across the United States, mariachi scholars say.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com