Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/100419 
Year of Publication: 
2014
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2014: Evidenzbasierte Wirtschaftspolitik - Session: Sovereign Debt No. F12-V4
Publisher: 
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft, Kiel und Hamburg
Abstract: 
Many researchers have recommended to increase public debt in the aftermath of the fi nancial crisis in order to relax borrowing constraints for private households. This advice is based on the common assumption that borrowing conditions of private agents are exogenous to public policy. We study the impact of government debt on the provision of private credit in an economy in which borrowing limits arise because of limited contract enforceability and are thus determined as equilibrium outcomes. As such, they also depend on public policy, in particular on the amount of public debt. Using an incomplete markets economy in which households are subject to uninsurable earnings shocks, we show that an increase in government debt crowds out the supply of private credit. We also fi nd that government debt has signi ficantly different implications for aggregate welfare and economic activity in general if borrowing constraints are endogenous.
JEL: 
E20
E60
E44
Document Type: 
Conference Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.