Government Borrowing and Crowding Out
Yasin Onder,
Sara Restrepo-Tamayo,
Maria Alejandra Ruiz-Sanchez and
Mauricio Villamizar-Villegas
American Economic Journal: Macroeconomics, 2024, vol. 16, issue 1, 286-321
Abstract:
We investigate the impact of fiscal expansions on firm investment by exploiting firms with multiple banking relationships. Further, we conduct a localized approach and compare the lending behavior of banks that barely met and missed the criteria of being a primary dealer, as well as barely winners and losers at government auctions. Our results indicate that a 1 percentage point increase in primary dealer banks' bonds-to-assets ratio decreases loans by 0.2 percent, which leads to declines in firm investment, profits, and wages. Our findings are grounded in a quantitative model with which we compute the cost of borrowing on the economy.
JEL-codes: D22 E12 E23 G21 G32 H63 O11 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (2)
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DOI: 10.1257/mac.20200273
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