Correlated lending to government and the private sector: what do we learn from the Great Recession?

Peterson Ozili

MPRA Paper from University Library of Munich, Germany

Abstract: The purpose of the study is to investigate the correlation between credit supply to government and credit supply to the private sector to determine whether there is a crowding-out or crowding-in effect of credit supply to government on credit supply to the private sector. The findings show a significant positive correlation between credit supply to government and credit supply to the private sector. There is also a significant positive relationship between credit supply to government and credit supply to the private sector, implying a crowding-in effect of government borrowing on private sector borrowing. The positive correlation between credit supply to government and credit supply to the private sector by banks is stronger and highly significant in the period before the Great Recession, while the positive correlation is weaker and less significant during the Great Recession, and the correlation further weakens after the Great Recession. The regional analyses show that the positive correlation between credit supply to government and credit supply to the private sector by banks is stronger and highly significant in the African region than in the Asian region and the region of the Americas.

Keywords: Domestic credit to private sector; government borrowing; crowding-out; credit supply; private sector; government; bank credit; recession; Africa; Asia; Europe; America; correlation. (search for similar items in EconPapers)
JEL-codes: E51 E63 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-fdg and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:116407

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