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Crowding-out and Crowding-in Effects of Government Bonds Market on Private Sector Investment (Japanese Case Study)


  • Abdullatif, Alani Emad M.A.


This paper reviews the relationship between public sector investment and private sector investment through government expenditures financed by government bonds in the Japanese economy. This study hypothesizes that deficit financing by bond issues does not crowd out private sector investment, and this finance method may crowd in. Thus the government increases bond issues and sells them in the domestic and international financial markets. This method does not affect interest rates because they are insensitive to government expenditures and they depend on interest rates levels in the international financial market more than in the domestic financial market because of globalization and integration among financial markets.

Suggested Citation

  • Abdullatif, Alani Emad M.A., 2006. "Crowding-out and Crowding-in Effects of Government Bonds Market on Private Sector Investment (Japanese Case Study)," IDE Discussion Papers 74, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  • Handle: RePEc:jet:dpaper:dpaper74

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    References listed on IDEAS

    1. H. Ahmed & SM. Miller, 2000. "Crowding-out and crowding-in effects of the components of government expenditure," Contemporary Economic Policy, Western Economic Association International, vol. 18(1), pages 124-133, January.
    2. Claessens,Stijn & Klingebiel,Daniela M. H. & Schmukler,Sergio L., 2003. "Government bonds in domestic and foreign currency: the role of macroeconomic and institutional factors," Policy Research Working Paper Series 2986, The World Bank.
    3. Aschauer, David Alan, 1989. "Does public capital crowd out private capital?," Journal of Monetary Economics, Elsevier, vol. 24(2), pages 171-188, September.
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    More about this item


    Government debt; Budget deficit; Government bonds; Crowding out/crowding in; Japan; National debt; Private sector; 日本; 国債; 民間部門;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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