THE IMPACT OF DOMESTIC INVESTORS’ PARTICIPATION IN GOVERNMENT DEBT ON BANK LOANS TO THE PRIVATE SECTOR: A CROSS-COUNTRY STUDY
Abstract
This study analyzes the impact of domestic investors’ participation in government debt on bank loans to the private sector in advanced and emerging countries. We find that domestic bank participation in government debt has a more profound negative impact on bank loans to the private sector in advanced than in emerging countries. Meanwhile, domestic non-bank participation in government debt only negatively impacts bank loans to private sector in emerging countries. While both domestic bank and non-bank participation in government debt have a negative impact on bank loans to the private sector in emerging countries, the latter has a weaker impact.
Downloads
References
Andrieș, A. M., Ongena, S., & Sprincean, N. (2021). The COVID-19 Pandemic and Sovereign Bond Risk. North American Journal of Economics and Finance, 58(September 2020), 101527. https://doi.org/10.1016/j.najef.2021.101527
Arslanalp, S., & Tsuda, T. (2014a). Tracking Global Demand for Advanced Economy Sovereign Debt. IMF Economic Review, 62, 430–464. https://doi.org/10.1057/imfer.2014.20
Arslanalp, S., & Tsuda, T. (2014b). Tracking Global Demand for Emerging Market Sovereign Debt. IMF Working Papers, WP/14/39.
Augustin, P., Sokolovski, V., Subrahmanyam, M. G., & Tomio, D. (2022). In Sickness and in Debt: The COVID-19 Impact on Sovereign Credit Risk. Journal of Financial Economics, 143, 1251–1274. https://doi.org/10.1016/j.jfineco.2021.05.009
Blackburne, E. F., & Frank, M. W. (2007). Estimation of Nonstationary Heterogeneous Panels. Stata Journal, 7, 197–208. https://doi.org/10.1177/1536867x0700700204
Bouis, R. (2019). Banks’ Holdings of Government Securities and Credit to the Private Sector in Emerging Market and Developing Economies. IMF Working Papers, WP/19/224.
Choi, I. (2001). Unit Root Tests for Panel Data. Journal of International Money and Finance, 20, 249–272. https://doi.org/10.1016/S0261-5606(00)00048-6
Christensen, J. (2004). Domestic Debt Markets in Sub-Saharan Africa. IMF Working Papers, WP/04/46.
Ciarlone, A. (2011). Housing Wealth Effect in Emerging Economies. Emerging Markets Review, 12, 399–417. https://doi.org/10.1016/j.ememar.2011.06.003
Ҫolak, G., & Öztekin, Ö. (2021). The Impact of COVID-19 Pandemic on Bank Lending around the World. Journal of Banking and Finance, 133(July 2020), 106207. https://doi.org/10.1016/j.jbankfin.2021.106207
De Bonis, R., & Stacchini, M. (2013). Does Government Debt Affect Bank Credit? International Finance, 16, 289–310. https://doi.org/10.1111/j.1468-2362.2013.12037.x
Eberhardt, M., & Presbitero, A. F. (2015). Public Debt and Growth : Heterogeneity and Non-linearity. Journal of International Economics, 97, 45–58. https://doi.org/10.1016/j.jinteco.2015.04.005
Feld, L. P., Köhler, E. A., & Wolfinger, J. (2020). Modeling Fiscal Sustainability in Dynamic Macro-panels with Heterogeneous Effects: Evidence from German Federal States. International Tax and Public Finance, 27, 215–239. https://doi.org/10.1007/s10797-019-09548-7
Fuinhas, J. A., Marques, A. C., & Couto, A. P. (2015). Oil-growth Nexus in Oil Producing Countries: Macro Panel Evidence. International Journal of Energy Economics and Policy, 5, 148–163.
Gennaioli, N., Martin, A., & Rossi, S. (2018). Banks, Government Bonds, and Default: What Do the Data Say? Journal of Monetary Economics, 98, 98–113. https://doi.org/10.1016/j.jmoneco.2018.04.011
Hauner, D. (2009). Public Debt and Financial Development. Journal of Development Economics, 88, 171–183. https://doi.org/10.1016/j.jdeveco.2008.02.004
Hausman, J. A. (1978). Specification Tests in Econometrics. Econometrica, 46, 1251–1271.
Im, K. S., Pesaran, M. H., & Shin, Y. (2003). Testing for Unit Roots in Heterogeneous Panels. Journal of Econometrics, 115, 53–74. https://doi.org/10.1016/S0304-4076(03)00092-7
Ismihan, M., & Ozkan, F. G. (2012). Public Debt and Financial Development : A Theoretical Exploration. Economics Letters, 115, 348–351. https://doi.org/10.1016/j.econlet.2011.12.040
Mbate, M. (2013). Domestic Debt, Private Sector Credit and Economic Growth in Sub-Saharan Africa. African Development Review, 25, 434–446. https://doi.org/10.1111/1467-8268.12040
Moscone, F., & Tosetti, E. (2010). Health Expenditure and Income in the United States. Health Econ, 19, 1385–1403.
Pesaran, M. H. (2007). A Simple Panel Unit Root Test in the Presence of Cross-section Dependence. Journal of Applied Econometrics, 22, 265–312. https://doi.org/10.1002/jae.951
Pesaran, M. H., Shin, Y., & Smith, R. P. (1999). Pooled Mean Group Estimation of Dynamic Heterogeneous Panels. Journal of the American Statistical Association, 94, 621–634. https://doi.org/10.1080/01621459.1999.10474156
Pesaran, M. H., & Smith, R. (1995). Estimating Long-run Relationships from Dynamic Heterogeneous Panels. Journal of Econometrics, 68. https://doi.org/10.1016/0304-4076(94)01644-F
Reinhart, C. M., & Rogoff, K. S. (2011). The Forgotten History of Domestic Debt. The Economic Journal, 121, 319–350. https://doi.org/10.1111/j.1468-0297.2011.02426.x
Westerlund, J. (2007). Testing for Error Correction in Panel Data. Oxford Bulletin of Economics and Statistics, 69, 709–748. https://doi.org/10.1111/j.1468-0084.2007.00477.x
World Bank, I. (2001). Developing Government Bond Markets. https://doi.org/10.1596/0-8213-4955-4
Copyright (c) 2022 Bulletin of Monetary Economics and Banking
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Buletin Ekonomi Moneter dan Perbankan / Bulletin of Monetary Economics and Banking is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
