Affordable Access

Fiscal policy and interest rates in a small open economy

Sveriges Riksbank Stockholm
Publication Date
  • E12
  • E62
  • F41
  • Ddc:330
  • Term Structure Of Interest Rates
  • Ricardian Equivalence
  • Budget Deficits
  • Small Open Economy
  • Stationary And Non-Stationary Time Series
  • Design
  • Economics
  • Mathematics
  • Political Science


This paper contains an empirical investigation of the effects of fiscal policy on interest rates based on a conventional stochastic macro model designed for a small open economy. The empirical investigation undertaken utilizes data for Sweden, a country which has experienced very large fluctuations in the government budget deficits and in the short- and long-term nominal interest rates, thus providing a better empirical test than previous studies. According to the empirical results, larger budget deficits jspell higher interest rates, as posited by conventional macroeconomic theory.

There are no comments yet on this publication. Be the first to share your thoughts.