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GOVERNMENT DEBT AND THE DEMAND FOR MONEY: AN EXTREME BOUND ANALYSIS
Author(s) -
Deravi M. KEIVAN,
Hegji CHARLES E.,
Moberly H. DEAN
Publication year - 1990
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1990.tb00822.x
Subject(s) - economics , government debt , debt , monetary economics , debt to gdp ratio , internal debt , robustness (evolution) , econometrics , macroeconomics , biochemistry , chemistry , gene
The article provides evidence that there is a relationship between government debt and interest rates via the demand for money. This relationship is examined through the wealth effect of government debt on money demand, and the robustness of the results is tested by the use of extreme bound analysis in addition to standard econometric techniques. We find that OLS regression shows government debt fnfecting the demand for money positively, implying that Federal government debt is net wealth. In addition, the extreme bound analysis shows that the estimates of the government debt coefficient are robust under alternative specifications of the Goldfeld model.