The Impact of Interest Rate Changes on Bulgaria’s Government Debt for the Period 2003-2018

Authors

Keywords
government debt, interest rates, long-term government bonds, economic growth

Summary
This article emphasizes on the impact of interest rate changes on government debt. For this purpose, theoretical and empirical studies are initially systematized with the main focus being placed on the change of government debt in terms of continuously decreasing interest rates. The main trends in the change of government debt, interest payments, the real GDP growth rates and the interest rates for long-term government bonds in Bulgaria are also analyzed. The econometric analysis of the relationship between interest rates and government debt is applied including tests for long and short run causal relationship among variables. When comparing the results obtained for the degree of impact of interest rates and economic growth on debt, it is concluded that interest rates have a statistically significant but weak effect on government debt. There is much stronger (positive and statistically significant) effect of economic growth on debt, as opposed to the effect of interest rates.

JEL: E50, E62, H60, H63
Pages: 16
DOI: 

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