*Associate Professor, Ohio State University. I am grateful to Gertrud Fremling, John Lott, Dick Sweeney, and an anonymous referee for helpful comments.
ARE GOVERNMENT BONDS NET WEALTH? EVIDENCE FOR THE UNITED STATES
Article first published online: 28 SEP 2007
Volume 26, Issue 4, pages 551–566, October 1988
How to Cite
Evans, P. (1988), ARE GOVERNMENT BONDS NET WEALTH? EVIDENCE FOR THE UNITED STATES. Economic Inquiry, 26: 551–566. doi: 10.1111/j.1465-7295.1988.tb01517.x
- Issue published online: 28 SEP 2007
- Article first published online: 28 SEP 2007
- Cited By
This paper investigates whether government bonds are viewed as net wealth. If they are, the nominal interest rate in steady-state equilibrium should be an increasing function of the government debt and of government spending. Using forward interest rates realized during World War II, this paper finds no evidence of such a relationship. These data afford an especially powerful test because the federal debt rose from 29 to 106 percent of trend output during the war. This enormous increase in government debt actually appears to have reduced forward interest rates by a statistically significant, but small, amount.