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| Author: | Haan, J. de. Zelhorst, D. |
| Title: | The intertemporal substitution effect on government purchases on the interest rate: Empirical estimates for the Netherlands |
| Journal: | Empirical Economics
1992 : VOL.17:2, p. 293-302 |
| Index terms: | NETHERLANDS INTEREST RATES GOVERNMENT PURCHASING |
| Language: | eng |
| Abstract: | According to the intertemporal substitution theory of government spending temporary expenditures exert a positive influence on interest rates, while permanent spending does not. The authors of this paper have examined the empirical validity of this theory for the Netherlands in the period 1900-1939, following approaches as suggested recently by Barro (1987, b). In contrast with his results, the authors find that only if temporarily military spending is used as measure of temporary government outlays there is a contemporaneous effect on the nominal interest rate and a lagged effect on the real interest rate. |
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