@article{ART003011512},
author={Kangwoo Park},
title={The Long-Run Relation of Public Debt and Fiscal Balance to Government Bond Rates: An Empirical Study on the Validity of Modern Monetary Theory},
journal={Analyses & Alternatives},
issn={2508-822X},
year={2023},
volume={7},
number={3},
pages={181-230},
doi={10.22931/aanda.2023.7.3.007}
TY - JOUR
AU - Kangwoo Park
TI - The Long-Run Relation of Public Debt and Fiscal Balance to Government Bond Rates: An Empirical Study on the Validity of Modern Monetary Theory
JO - Analyses & Alternatives
PY - 2023
VL - 7
IS - 3
PB - Korea Consensus Institute
SP - 181
EP - 230
SN - 2508-822X
AB - Evaluating the empirical validity of Modern Monetary Theory, this study implements panel cointegration analysis on annual panel data (2000-2022) of OECD countries. Specifically, the sample countries are divided into groups based on the presence of their own sovereign currencies, and for each group, the long-run equilibrium relation (cointegration) between the ratio of public debt or fiscal deficit and government bond rates is tested and estimated. Main findings are as follows: applying the pooled mean-group estimation for panel cointegration, it is found that both the ratios of public debt and fiscal deficit have significantly positive long-run correlation with government bond rates in countries without sovereign currency such as the Euro-zone or fixed exchange rate regime countries. However, in countries with sovereign currency such as non-Euro-zone or floating exchange rate regime countries, the long-run correlation is either negative or not statistically significant. Particularly, in countries without sovereign currency, the ratio of public debt has significantly positive correlation with the real government bond rates in the short run as well as the long run. These results are consistent with the prediction of Modern Monetary Theory, thus providing a supporting evidence for the empirical validity of the theory.
KW - Modern Monetary Theory;Panel Cointegration Analysis;Sovereign Currency;Pooled Mean-Group Estimation
DO - 10.22931/aanda.2023.7.3.007
ER -
Kangwoo Park. (2023). The Long-Run Relation of Public Debt and Fiscal Balance to Government Bond Rates: An Empirical Study on the Validity of Modern Monetary Theory. Analyses & Alternatives, 7(3), 181-230.
Kangwoo Park. 2023, "The Long-Run Relation of Public Debt and Fiscal Balance to Government Bond Rates: An Empirical Study on the Validity of Modern Monetary Theory", Analyses & Alternatives, vol.7, no.3 pp.181-230. Available from: doi:10.22931/aanda.2023.7.3.007
Kangwoo Park "The Long-Run Relation of Public Debt and Fiscal Balance to Government Bond Rates: An Empirical Study on the Validity of Modern Monetary Theory" Analyses & Alternatives 7.3 pp.181-230 (2023) : 181.
Kangwoo Park. The Long-Run Relation of Public Debt and Fiscal Balance to Government Bond Rates: An Empirical Study on the Validity of Modern Monetary Theory. 2023; 7(3), 181-230. Available from: doi:10.22931/aanda.2023.7.3.007
Kangwoo Park. "The Long-Run Relation of Public Debt and Fiscal Balance to Government Bond Rates: An Empirical Study on the Validity of Modern Monetary Theory" Analyses & Alternatives 7, no.3 (2023) : 181-230.doi: 10.22931/aanda.2023.7.3.007
Kangwoo Park. The Long-Run Relation of Public Debt and Fiscal Balance to Government Bond Rates: An Empirical Study on the Validity of Modern Monetary Theory. Analyses & Alternatives, 7(3), 181-230. doi: 10.22931/aanda.2023.7.3.007
Kangwoo Park. The Long-Run Relation of Public Debt and Fiscal Balance to Government Bond Rates: An Empirical Study on the Validity of Modern Monetary Theory. Analyses & Alternatives. 2023; 7(3) 181-230. doi: 10.22931/aanda.2023.7.3.007
Kangwoo Park. The Long-Run Relation of Public Debt and Fiscal Balance to Government Bond Rates: An Empirical Study on the Validity of Modern Monetary Theory. 2023; 7(3), 181-230. Available from: doi:10.22931/aanda.2023.7.3.007
Kangwoo Park. "The Long-Run Relation of Public Debt and Fiscal Balance to Government Bond Rates: An Empirical Study on the Validity of Modern Monetary Theory" Analyses & Alternatives 7, no.3 (2023) : 181-230.doi: 10.22931/aanda.2023.7.3.007
