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Public debt and financial development

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  • Hauner, David

Abstract

We examine the role of public debt in financial development. The literature has highlighted its supportive role through providing collateral and benchmark. We contrast this "safe asset" view to a "lazy banks" view: developing banking sectors that lend mainly to the public sector may develop more slowly, because it could make banks profitable but inefficient. Results from country-level and bank-level regressions are more supportive of the "lazy banks" view, but the "safe asset" view seems to play a role at moderate levels of public debt held by banks. There is also evidence of a harmful interaction between public debt and financial repression.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 88 (2009)
Issue (Month): 1 (January)
Pages: 171-183

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Handle: RePEc:eee:deveco:v:88:y:2009:i:1:p:171-183

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Web page: http://www.elsevier.com/locate/devec

Related research

Keywords: G21 H6 Public debt Financial development Bank efficiency Bank profitability;

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References

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Citations

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Cited by:
  1. Matthieu Bussière & Marcel Fratzscher, 2008. "Financial Openness and Growth: Short-run Gain, Long-run Pain?," Review of International Economics, Wiley Blackwell, vol. 16(1), pages 69-95, 02.
  2. Marc Quintyn & Geneviève Verdier, 2010. "Mother, Can I trust the Government?Sustained Financial Deepening - A Political InstitutionsView," IMF Working Papers 10/210, International Monetary Fund.
  3. Ayadi, Rym & Arbak, Emrah & Ben-Naceur, Sami & De Groen, Willem Pieter, 2013. "Determinants of Financial Development across the Mediterranean," CEPS Papers 7770, Centre for European Policy Studies.
  4. Robert Blotevogel, 2013. "Measuring and Mending Monetary Policy Effectiveness Under Capital Account Restrictions—Lessons from Mauritania," IMF Working Papers 13/77, International Monetary Fund.
  5. repec:hal:cesptp:halshs-00332049 is not listed on IDEAS
  6. Hauner, David & Prati, Alessandro & Bircan, Cagatay, 2013. "The interest group theory of financial development: Evidence from regulation," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 895-906.
  7. M Ismihan & G Ozkan, 2010. "Public debt and Financial development: A theoretical exploration," Discussion Papers 10/14, Department of Economics, University of York.
  8. Lecturer Gheorghița Dincă Ph. D, Assoc. Prof. Marius Sorin Dincă Ph. D, 2011. "The Evolution Of The Romanian Public Debt During The Last 10 Years," Annals of University of Craiova - Economic Sciences Series, University of Craiova, Faculty of Economics and Business Administration, vol. 4(39), pages 100-109, May.
  9. Hallak, Issam, 2013. "Private sector share of external debt and financial stability: Evidence from bank loans," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 17-41.
  10. Jesus Gonzalez-Garcia & Francesco Grigoli, 2013. "State-Owned Banks and Fiscal Discipline," IMF Working Papers 13/206, International Monetary Fund.
  11. Poonam Gupta & Kalpana Kochhar & Sanjaya Panth, 2011. "Bank Ownership and the Effects of Financial Liberalization: Evidence from India," IMF Working Papers 11/50, International Monetary Fund.
  12. Nahla Samargandi & Jan Fidrmuc & Sugata Ghosh, 2014. "Is the Relationship between Financial Development and Economic Growth Monotonic? Evidence from a Sample of Middle Income Countries," CESifo Working Paper Series 4743, CESifo Group Munich.
  13. Thierry Tressel & Enrica Detragiache, 2008. "Do Financial Sector Reforms Lead to Financial Development? Evidence from a New Dataset," IMF Working Papers 08/265, International Monetary Fund.
  14. Riccardo De Bonis & Massimiliano Stacchini, 2010. "What Determines the Size of Bank Loans in Industrialized Countries? The Role of Government Debt," Mo.Fi.R. Working Papers 39, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  15. Arnaud Mehl & Julien Reynaud, 2008. "Domestic debt structures in emerging markets : new empirical evidence," Documents de travail du Centre d'Economie de la Sorbonne bla08059, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.

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