The relationship between budget deficits and capital inflows: Further econometric evidence

N. R.Vasudeva Murthy; Joseph M. Phillips

doi:10.1016/S1062-9769(96)90047-2

The relationship between budget deficits and capital inflows: Further econometric evidence

N. R.Vasudeva Murthy, Joseph M. Phillips

Research output: Contribution to journal › Article › peer-review

5 Scopus citations

Abstract

This research note examines the impact of federal deficits on U.S. capital inflows. Expanding on the previous work of Bahmani-Oskooee and Payesteh (1994), we employ the relatively new maximum likelihood procedure developed byJohansen (1988) andjohansen andJuselius (1990) to do cointegration tests. The results find a long run relationship between budget deficits and capital inflows. In addition, findings from error-correlation modeling reveal that short-run disequilibria in financial markets are corrected very rapidly, suggesting that these markets are efficient.

Original language	English (US)
Pages (from-to)	485-494
Number of pages	10
Journal	Quarterly Review of Economics and Finance
Volume	36
Issue number	4
DOIs	https://doi.org/10.1016/S1062-9769(96)90047-2
State	Published - Dec 1 1996
Externally published	Yes

All Science Journal Classification (ASJC) codes

Finance
Economics and Econometrics

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AB - This research note examines the impact of federal deficits on U.S. capital inflows. Expanding on the previous work of Bahmani-Oskooee and Payesteh (1994), we employ the relatively new maximum likelihood procedure developed byJohansen (1988) andjohansen andJuselius (1990) to do cointegration tests. The results find a long run relationship between budget deficits and capital inflows. In addition, findings from error-correlation modeling reveal that short-run disequilibria in financial markets are corrected very rapidly, suggesting that these markets are efficient.

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