EMPIRICAL NOTE ON THE IMPACT OF FEDERAL-GOVERNMENT BUDGET DEFICITS ONBANK MORTGAGE RATES IN THE US, 1963-1995

This study examines, for the period 1963-1995, the impact of federal b udget deficits in the US on mortgage interest rates at commercial bank s. Interest rates at banks have been largely neglected in the deficit/ interest rate literature for the US. Moreover, the deficit/interest ra te literature for the US has largely ignored the second half of the 19 80s and the 1990s. Accordingly, this study investigates the impact of federal budget deficits on the mortgage rate charged by commercial ban ks, while providing current/updated information on this important poli cy issue. The estimates find this mortgage rate to be an increasing fu nction of the budget deficit.