Fiscal consolidations and the cost of credit
Şenay Ağca and
Deniz Igan
Journal of International Economics, 2019, vol. 120, issue C, 84-108
Abstract:
Using loan-level data covering 15 advanced economies over 1990–2014, we show that the cost of credit increases with fiscal consolidations. This increase is observed with both tax hikes and spending cuts, and is smaller when the consolidation is large. The cost of credit goes up with tax hikes that apply to a particular sector, but not with spending cuts that are directed at a certain sector. Firms that face higher costs tend to be small, highly leveraged, domestic, government dependent, and financially constrained. Hence, there may be costs associated with fiscal consolidations—beyond the aggregate-demand channel—borne primarily by firms operating in sectors directly affected by the consolidation measures and by those that have limited access to international markets and alternative financing sources.
Keywords: Fiscal policy; Sovereign debt; Cost of credit; Corporate loans (search for similar items in EconPapers)
JEL-codes: E62 G28 G32 H32 H60 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (4)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022199619300534
Full text for ScienceDirect subscribers only
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:120:y:2019:i:c:p:84-108
DOI: 10.1016/j.jinteco.2019.05.004
Access Statistics for this article
Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and RodrÃguez-Clare, Andrés
More articles in Journal of International Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu (repec@elsevier.com).