000			01407pab a2200157 454500
008			180718b2004 xxu||||| |||| 00| 0 eng d
100			_aGoyal, Rajan
245			_aDoes higher fiscal deficit lead to rise in interest rates?: an empirical investigation
260			_c2004
300			_ap.2128-133.
362			_a22 May
520			_aThe relationship between fiscal deficit and the rate of interest is still an unsettled issue. Theoretically, at least in neo-classical sense, funding of government requirements through market borrowings would not only induce rise in interest rates, but the increased funding cost in turn would also contribute to the rise in fiscal deficit. In the Indian context, the coexistence of falling interest rates and growing size of fiscal deficit in the recent years, however, seems to suggest that the causation between the two does no hold. Further, there is empirical evidence suggesting one-way causality running only from real interest rate to fiscal deficit. This paper re-examines this issue and argues that the absence of an apparent fiscal impact on interest rate is essentially the result of higher liquidity in the system. Empirical results drawn through a VAR model show that there is a two-way causality between gross fiscal deficit and the real interest rate. -Reproduced.
650			_aInterest rates
773			_aEconomic and Political Weekly
909			_a60570
999			_c60570 _d60570