The Dominant Borrower Syndrome: The Case of Pakistan

Sajawal Khan (), Farooq Pasha, Muhammad Rehman () and Ali Choudhary
Additional contact information
Muhammad Rehman: State Bank of Pakistan

No 77, SBP Working Paper Series from State Bank of Pakistan, Research Department

Abstract: In this paper, we analyse the pressure fiscal expansion exerts on the economy via credit markets in Pakistan. We extend Melina and Villa (2014) by allowing government to compete with the private borrowers (firms) for the bank credit in monopolistically competitive banking industry to the extent that it can come to dominate banks balance-sheets, a feature observed in Pakistan following 2008 Global Financial Crisis. Our DSGE model captures the counter cyclical behavior of government borrowings that leads to counter cyclical spreads in loans market. Furthermore, we also find that consumption tax is the preferable policy instrument to address the fiscal deficit in bad times rather than resorting to the dominant borrower behaviour.

Keywords: DSGE; Commercial Banks; Government Borrowing; Business Cycles; Emerging Economies (search for similar items in EconPapers)
JEL-codes: E3 E52 E6 H2 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2016-08
New Economics Papers: this item is included in nep-dge and nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sbp.org.pk/publications/wpapers/2016/wp77.pdf First version, 2016 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.sbp.org.pk/publications/wpapers/2016/wp77.pdf [301 Moved Permanently]--> https://www.sbp.org.pk/publications/wpapers/2016/wp77.pdf)

Related works:
Working Paper: The Dominant Borrower Syndrome: The Case of Pakistan (2016)
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:sbp:wpaper:77

Access Statistics for this paper

More papers in SBP Working Paper Series from State Bank of Pakistan, Research Department Contact information at EDIRC.
Bibliographic data for series maintained by Faisal Saleem ().