Abstract:

The paper is aimed at investigating the main factor that influences the long-term interest rate yields in Jordan. That is the government budget deficit. The importance of which is that such knowledge would help not only financial managers with their capital and operational decisions, but also bank asset/liability management and risk. For this purpose, the paper examines the effect of the government budget deficit and other factors on the ex post interest rate yield on long-term bonds in Jordan during the period (2000-2013). The multi-regression results show that government budget deficit and real personal tax rate variables are statistically significant. This indicates that, after controlling for other variables, there is a significant impact of budget deficit on long term interest rate in Jordan. This result is in line with the theory and the literature. Key Words: Government Budget, Deficit, Long Term, Interest Rate, Jordan.

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