Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/197885 
Year of Publication: 
2018
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2018-32
Publisher: 
Bank of Canada, Ottawa
Abstract: 
This paper finds that debt-financed government spending multipliers vary considerably depending on the location of the debt buyer. In a sample of 33 countries, we find that government spending multipliers are larger when government purchases are financed by issuing debt to foreign investors (non-residents), compared with when government purchases are financed by issuing debt to home investors (residents). A theoretical model (with flexible or sticky prices) shows that the location of the government creditor produces these differential responses to the extent that private investment is crowded out in each case. Increasing international capital mobility of the resident private sector decreases the difference between the two types of financing, both in the model and in the data.
Subjects: 
Debt management
Economic models
Fiscal policy
International financial markets
JEL: 
E2
E62
F41
H3
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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