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British Journal of Economics, Management & Trade, ISSN: 2278-098X,Vol.: 3, Issue.: Issue 4 (October-December)


Budget Deficits and Long-Term Interest Rates in Japan


Khurshid M. Kiani1 and Toshihiro Uchida2*
1Nottingham University Business School, AB 266, 199 TaiKang East Road, Ningbo, 315100, China.
2School of Economics, Chukyo University, 101-2 Yagoto-Honmachi, Showa-ku, Nagoya, Aichi 466-8666, Japan.

Article Information


(1) Ling-Yun He, Energy Economics and Environmental Policies, College of Economics & Management of China Agricultural University, Beijing, China.


(1) Aziz Kutlar, Sakarya University, Turkey.

(2) Richard Cebula, Jacksonville University, USA.

(3) Anonymous.

(4) Bui Trinh, Vietnam.

(5) Wasim I. Al-Habil, College of Commerce, The Islamic University of Gaza, Palestinian.

Complete Peer review History: http://www.sciencedomain.org/review-history/1772


The effect of budget deficits on the economy is one of the most important unresolved issues in public economics and macroeconomics. Based on a simple loanable funds model that describes the relationship between budget deficits and long-term interest rates, this study empirically quantifies how Japan’s large budget deficits affects long-term interest rates and the slope of the yield curve in Japan. Estimation based on the quarterly data for the period 1981.II-2009.I reveals statistically significant evidence of the positive link between budget deficits and long-term interest rates. This finding supports the Keynesian view of the budget deficit and is generally consistent with the recent studies that employed improved and expanded dataset in the United States.

Keywords :

Budget deficits; long-term interest rates; yield curve; cointegration; Fisher hypothesis.

Full Article - PDF    Page 389-404

DOI : 10.9734/BJEMT/2013/5146

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