IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/116407.html
   My bibliography  Save this paper

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

Author

Listed:
  • Ozili, Peterson K

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.

Suggested Citation

  • Ozili, Peterson K, 2023. "Correlated lending to government and the private sector: what do we learn from the Great Recession?," MPRA Paper 116407, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:116407
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/116407/1/MPRA_paper_116407.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Yi Huang & Marco Pagano & Ugo Panizza, 2020. "Local Crowding‐Out in China," Journal of Finance, American Finance Association, vol. 75(6), pages 2855-2898, December.
    2. Abubakar Ado Ahmad & Adegoke Ibrahim Adeleke & Augustine Ujunwa, 2019. "Government Borrowing Behaviour: Implications for Private Sector Growth in Nigeria," International Journal of Sustainable Development & World Policy, Conscientia Beam, vol. 8(2), pages 68-82.
    3. Jin, Xiao Meng & Mai, Yong & Cheung, Adrian Wai Kong, 2022. "Corporate financialization and fixed investment rate: Evidence from China," Finance Research Letters, Elsevier, vol. 48(C).
    4. Ha, Van & Holmes, Mark J. & Tran, Tuyen Quang, 2022. "Does foreign investment crowd in domestic investment? Evidence from Vietnam," International Economics, Elsevier, vol. 171(C), pages 18-29.
    5. Deng, Jiapin, 2022. "The crowding-out effect of formal finance on the P2P lending market: An explanation for the failure of China's P2P lending industry," Finance Research Letters, Elsevier, vol. 45(C).
    6. Abubakar Ado, Ahmad & Adegoke Ibrahim, Adeleke & Augustine, Ujunwa, 2019. "Government Borrowing Behaviour: Implications for Private Sector Growth in Nigeria," International Journal of Sustainable Development & World Policy, Conscientia Beam, vol. 8(2), pages 68-82.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wang, He & Yao, Yang & Zhou, Yue, 2022. "Markets price politicians: Evidence from China’s municipal bond markets," Journal of Economics and Business, Elsevier, vol. 122(C).
    2. Mindaugas Butkus & Diana Cibulskiene & Lina Garsviene & Janina Seputiene, 2021. "Empirical Evidence on Factors Conditioning the Turning Point of the Public Debt–Growth Relationship," Economies, MDPI, vol. 9(4), pages 1-22, December.
    3. Othmani, Abdelhafidh & Ben Yedder, Nadia & Bakari, Sayef, 2023. "The Cointegration Relationship between Patent, Domestic Investment and Economic Growth in United States of America," MPRA Paper 118245, University Library of Munich, Germany.
    4. Gong Cheng & Javier Diaz-Cassou & Aitor Erce, 2019. "The macroeconomic effects of official debt restructuring: evidence from the Paris Club," Oxford Economic Papers, Oxford University Press, vol. 71(2), pages 344-363.
    5. Wang, Wenlong & Huang, Yuqin & Watson, John & Yang, Bowen, 2023. "The intra-regional spillover effects of bond defaults: Evidence from the Chinese corporate debt market," Pacific-Basin Finance Journal, Elsevier, vol. 77(C).
    6. Bussolo, Maurizio & de Nicola, Francesca & Panizza, Ugo & Varghese, Richard, 2022. "Politically connected firms and privileged access to credit: Evidence from Central and Eastern Europe," European Journal of Political Economy, Elsevier, vol. 71(C).
    7. Kose M. Ayhan & Ohnsorge Franziska & Sugawara Naotaka, 2022. "A Mountain of Debt: Navigating the Legacy of the Pandemic," Journal of Globalization and Development, De Gruyter, vol. 13(2), pages 233-268, December.
    8. Isha Agarwal & David Jaume & Everardo Tellez de la Vega & Martin Tobal, 2024. "Differential Crowding Out Effects of Government Loans and Bonds: Evidence from an Emerging Market Economy," Working Papers 314, Red Nacional de Investigadores en Economía (RedNIE).
    9. Chen, Deqiu & Ma, Yujing & Martin, Xiumin & Michaely, Roni, 2022. "On the fast track: Information acquisition costs and information production," Journal of Financial Economics, Elsevier, vol. 143(2), pages 794-823.
    10. Yin, Libo & Yang, Sen, 2023. "Oil price returns and firm's fixed investment: A production pattern," Energy Economics, Elsevier, vol. 125(C).
    11. Chong-en Bai & Chang-Tai Hsieh & Zheng Song, 2020. "Special Deals with Chinese Characteristics," NBER Macroeconomics Annual, University of Chicago Press, vol. 34(1), pages 341-379.
    12. Zhu, Jun & Xu, Haokun & Zhang, Yue, 2022. "Local government debt and firm productivity: Evidence from China," Research in International Business and Finance, Elsevier, vol. 63(C).
    13. Carmen M. Reinhart & Franziska L. Ohnsorge & Kenneth S. Rogoff & M. Ayhan Kose, 2022. "The Aftermath of Debt Surges," Annual Review of Economics, Annual Reviews, vol. 14(1), pages 637-663, August.
    14. Kate Hynes & Yongzheng Liu & Jie Ma & Ian Wooton, 2022. "Tax competition for FDI: China’s exceptional approach," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(3), pages 788-809, June.
    15. Ms. Yu Shi & Robert M. Townsend & Wu Zhu, 2019. "Internal Capital Markets in Business Groups and the Propagation of Credit Supply Shocks," IMF Working Papers 2019/111, International Monetary Fund.
    16. Ke Guo & Xuemeng Guo & Jun Zhang, 2023. "Financial asset allocation duality and enterprise upgrading: empirical evidence from the Chinese A-share market," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-11, December.
    17. Kaiji Chen & Haoyu Gao & Patrick Higgins & Daniel F. Waggoner & Tao Zha, 2023. "Monetary Stimulus amidst the Infrastructure Investment Spree: Evidence from China's Loan‐Level Data," Journal of Finance, American Finance Association, vol. 78(2), pages 1147-1204, April.
    18. Mathias Hoffmann & Iryna Stewen & Michael Stiefel, 2021. "Growing Like Germany: Local Public Debt, Local Banks, Low Private Investment," Working Papers 2103, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz.
    19. Wang, Jiaxin & Huang, Xiang & Gu, Qiankun & Song, Zilong & Sun, Ruiyi, 2023. "How does fintech affect bank risk? A perspective based on financialized transfer of government implicit debt risk," Economic Modelling, Elsevier, vol. 128(C).
    20. Eswar Prasad, 2023. "Has China's Growth Gone from Miracle to Malady?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 54(1 (Spring), pages 243-270.

    More about this item

    Keywords

    Domestic credit to private sector; government borrowing; crowding-out; credit supply; private sector; government; bank credit; recession; Africa; Asia; Europe; America; correlation.;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:116407. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.