A non-monotonic relationship between public debt and economic growth: the effect of financial monopsony

Roberts Mark A. ()
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Roberts Mark A.: University of Nottingham, School of Economics, University Park Sir Clive Granger BuildingNottingham NG7 2RD, United Kingdom of Great Britain and Northern Ireland

The B.E. Journal of Macroeconomics, 2017, vol. 17, issue 2, 10

Abstract: A small amount of fixed-interest public debt may raise economic growth, if the financial sector is monopsonistic. We show that there are also redistributive gains favouring financial outsiders, defined by their lack of access to a stock exchange. The requirements are that issuing public debt raises the monopsony interest rate, thus reduces the value of financial sector equity, which, like public debt, is another source of crowding-out.

Keywords: economic growth; financial sector equity; monopsony; non-productive saving; public debt (search for similar items in EconPapers)
JEL-codes: E62 H63 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1515/bejm-2015-0157

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