Public debt and financial development: A theoretical exploration

In countries where the government is the major recipient of bank lending, public debt is likely to harm financial development. Moreover, the lower the financial depth, the greater the adverse effects of public borrowing on financial development and macroeconomic outcomes. ► We examine the role of pu...

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Bibliographic Details
Published inEconomics letters Vol. 115; no. 3; pp. 348 - 351
Main Authors Ismihan, Mustafa, Ozkan, F. Gulcin
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.06.2012
Elsevier Science Ltd
Subjects
Bank loans
Credit to government
Deficit financing
Economic development
Economic models
Economic theory
Financial development
Macroeconomics
Public borrowing
Public debt
Studies
E52
E63
Public debt
H63
Credit to government
Financial development
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Summary:In countries where the government is the major recipient of bank lending, public debt is likely to harm financial development. Moreover, the lower the financial depth, the greater the adverse effects of public borrowing on financial development and macroeconomic outcomes. ► We examine the role of public debt in financial development. ► Public debt may harm financial development if government borrows heavily from the banking sector. ► The lower the financial depth, the greater the adverse affects of public borrowing. ► Our results provide an alternative explanation for ’contractionary fiscal expansions’.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2011.12.040