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Does Government Borrowing Crowd out Private Sector Credit in Pakistan

Author

Listed:
  • Sajjad Zaheer

    (State Bank of Pakistan)

  • Fatima Khaliq

    (State Bank of Pakistan)

  • Muhammad Rafiq

    (State Bank of Pakistan)

Abstract

We investigate the impact of government borrowing from the scheduled banks on the credit to private sector in Pakistan, using monthly data from 1998:M6 to 2015:M12. We find that a one percentage point growth in the government borrowing leads to 8 basis points crowding out of the private sector credit in four months. Albeit small, there is negative impact of government borrowing on the private sector credit. The results remain unchanged even after implementation of the interest rate corridor since August 2009.

Suggested Citation

  • Sajjad Zaheer & Fatima Khaliq & Muhammad Rafiq, 2017. "Does Government Borrowing Crowd out Private Sector Credit in Pakistan," SBP Working Paper Series 83, State Bank of Pakistan, Research Department.
    • Handle: RePEc:sbp:wpaper:83
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    File URL: http://www.sbp.org.pk/publications/wpapers/2017/wp83.pdf
    File Function: First version, 2017
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    Cited by:

    1. Enock Mwakalila, 2020. "Crowding Out of Private Sector in Tanzania: Government Expenditure, Domestic Borrowing, and Lending Rates," Emerging Economy Studies, International Management Institute, vol. 6(1), pages 123-135, May.

    More about this item

    Keywords

    Private sector credit; Government policy and regulation; Government borrowing; Emerging economies;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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