Does an Increase in Government Debt Threaten Economic Growth Recovery Via Tightening Credit Conditions?

Nombulelo Gumata () and Eliphas Ndou
Additional contact information
Nombulelo Gumata: South African Reserve Bank

Chapter Chapter 12 in Achieving Price, Financial and Macro-Economic Stability in South Africa, 2021, pp 181-188 from Springer

Abstract: Abstract Evidence in this chapter reveals that a positive standard deviation increase in government debt to GDP leads to a significant tightening in credit conditions. The unexpected tightening in credit conditions leads to a significant contraction in GDP, household consumption, gross fixed-capital formation, business and consumer confidence. The counterfactual analysis shows that GDP, investment and household consumption decline more when the credit conditions channel is active in the model and transmits positive government debt shocks compared to when this channel is shut off. This suggests that the tightening in credit conditions due to an unexpected increase in government gross loan debt worsens the delay in the recovery of economic growth. This implies that there is an urgent need for policy interventions that loosen credit conditions.

Date: 2021
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:spr:sprchp:978-3-030-66340-7_12

Ordering information: This item can be ordered from
http://www.springer.com/9783030663407

DOI: 10.1007/978-3-030-66340-7_12

Access Statistics for this chapter

More chapters in Springer Books from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().