Do budget deficits crowd in or crowd out private investment: evidence from Europe
The impact of budget deficits on private investment is an unsettled issue. If budget deficits are to be financed by borrowing, interest rates must rise so that capital markets can reach equilibrium. High interest rates, in turn, result in a decreased investment, hence the crowding-out effect. On the other hand, if budget deficits help boost economic growth, investors could become more optimistic and decide to invest more, hence the crowding-in effect. Finally, if an increase in deficits due to tax cuts today is to be matched by tax increases in the future, interest rates and investment may not change. In this paper we employ cointegration analysis and data from nine European countries to test the impact of budget deficits on private investment.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 1 (2006)
Issue (Month): 3 ()
|Contact details of provider:|| Web page: http://www.inderscience.com/browse/index.php?journalID=97 |
When requesting a correction, please mention this item's handle: RePEc:ids:ijpubp:v:1:y:2006:i:3:p:223-232. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Graham Langley)
If references are entirely missing, you can add them using this form.