Economic Freedom, Budget Deficits, and Perceived Risk from Larger National Debt-to-GDP Ratios: An Exploratory Analysis of Their Real Interest Rate Effects
Bibliographic record
Abstract
Since the early 1980s, there have been a number of principally empirical studies of the impact of government budget deficits on interest rates that have typically tested the hypothesis that larger deficits raise interest rates. However, in more recent years, this topic has received far less attention. Accordingly, this study seeks to “update” the findings of such studies and to do so for the dominant North American economies of Canada and the U.S. Furthermore, in the pursuit of further insights into interest rates, the present study also investigates an effectively heretofore overlooked variable that arguably also might influence interest rates, namely, economic freedom. Finally, given the increased upward trend of government debt (relative to GDP) in recent years in Canada and the U.S., this study investigates the interest rate impact of rising national debt-to-GDP ratios. For the 1995–2024 period (and also in one estimate for the 1985–2001 period), this exploratory study finds compelling evidence (1) that the real interest rate yield on 10-year Treasuries in Canada and the real interest rate yield on 10-year U.S. Treasury notes are increasing functions of the central government budget deficits in both Canada and the U.S., respectively, and (2) the real interest rate yields on 10-year Treasuries in Canada and 10-year U.S. Treasury notes are both decreasing functions of economic freedom in Canada and the U.S., respectively. On the other hand, regarding the impact of a higher national debt-to-GDP ratio on the real ten-year Treasury yield, there is only very mixed support for an impact, with support for its impact coming from the Canadian estimates but no support whatsoever coming from the U.S. estimates.
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How this classification was reachedexpand
Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.001 | 0.000 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.001 | 0.000 |
| Bibliometrics | 0.001 | 0.000 |
| Science and technology studies | 0.000 | 0.000 |
| Scholarly communication | 0.000 | 0.000 |
| Open science | 0.000 | 0.000 |
| Research integrity | 0.000 | 0.000 |
| Insufficient payload (model declined to judge) | 0.000 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one teacher head, not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".