This paper focuses on the empirical literature concerning the reduced-form relationship between interest rates and budget deficits. The main empirical problem in estimating this relationship is to control for other factors determining real interest rates, notably the response of monetary policy to the business cycle. In a setting in which the monetary authority can affect the short-term real interest rate, a monetary policy rule that responds to resource utilization combined with automatic fiscal stabilizers can produce a negative correlation between deficits and interest rates in the data even if an autonomous increase in the deficit through either a tax cut or a spending increase would raise interest rates. Hence the problem of endogeneity in such regressions is most likely severe (see, e.g., Bernheim, 1987 for a discussion of this issue). This paper presents a selective review of several approaches to address this problem. Gale and Orszag (2002) provide a more extensive survey of the recent literature in this area. The paper’s main conclusion, like Gale and Orszag’s, is that studies that carefully measure expectations of both future deficits and interest rates tend to find strong evidence that increase in budget deficits raise interest rates. However, the evidence reviewed below does for the most part not permit any conclusions about the empirical relevance of the Ricardian equivalence hypothesis, as the studies do not attempt to isolate the effects of pure timing changes in taxation from the effects of changes in the path of government spending.