Public spending volatility and financial market development
M Brzozowski, J Siwińska-Gorzelak - CESifo Economic Studies, 2013 - academic.oup.com
CESifo Economic Studies, 2013•academic.oup.com
A volatile pattern of government spending and its financing triggers uncertainty about the
timing and the costs of assets sale in financial markets, thereby leading to higher interest
rates. This, in turn, hampers the extension of credit to businesses and individuals. The
empirical results obtained for a wide group of developed and developing countries studied
over the 1960–2009 period corroborate the existence of the negative link between fiscal
volatility and financial development.(JEL codes: H20, G10)
timing and the costs of assets sale in financial markets, thereby leading to higher interest
rates. This, in turn, hampers the extension of credit to businesses and individuals. The
empirical results obtained for a wide group of developed and developing countries studied
over the 1960–2009 period corroborate the existence of the negative link between fiscal
volatility and financial development.(JEL codes: H20, G10)
Abstract
A volatile pattern of government spending and its financing triggers uncertainty about the timing and the costs of assets sale in financial markets, thereby leading to higher interest rates. This, in turn, hampers the extension of credit to businesses and individuals. The empirical results obtained for a wide group of developed and developing countries studied over the 1960–2009 period corroborate the existence of the negative link between fiscal volatility and financial development. (JEL codes: H20, G10)
Oxford University Press