American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Government Borrowing and Crowding Out
American Economic Journal: Macroeconomics
vol. 16,
no. 1, January 2024
(pp. 286–321)
Abstract
We investigate the impact of fiscal expansions on firm investment by exploiting firms with multiple banking relationships. Further, we conduct a localized approach and compare the lending behavior of banks that barely met and missed the criteria of being a primary dealer, as well as barely winners and losers at government auctions. Our results indicate that a 1 percentage point increase in primary dealer banks' bonds-to-assets ratio decreases loans by 0.2 percent, which leads to declines in firm investment, profits, and wages. Our findings are grounded in a quantitative model with which we compute the cost of borrowing on the economy.Citation
Önder, Yasin Kürşat, Sara Restrepo-Tamayo, Maria Alejandra Ruiz-Sanchez, and Mauricio Villamizar-Villegas. 2024. "Government Borrowing and Crowding Out." American Economic Journal: Macroeconomics, 16 (1): 286–321. DOI: 10.1257/mac.20200273Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- E12 General Aggregative Models: Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
- E23 Macroeconomics: Production
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- H63 National Debt; Debt Management; Sovereign Debt
- O11 Macroeconomic Analyses of Economic Development
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