The fiscal costs of debt-financed government spending
| dc.contributor.author | Dahlby, Bev | |
| dc.contributor.author | Ferede, Ergete | |
| dc.contributor.author | Fuss, Jake | |
| dc.date.accessioned | 2023-01-31T16:46:49Z | |
| dc.date.available | 2023-01-31T16:46:49Z | |
| dc.date.issued | 2022 | |
| dc.description.abstract | In this paper, we show that the notion that debt-financed spending has a low fiscal cost is misleading. We review econometric studies of OECD countries that show that the growth rate declines, interest rates increase, and the r - g differential increases as a country’s public debt ratio increases. We also estimate a simple regression model of the r – g gap in Canada based on the annual data from 1991 to 2019. Consistent with the findings of other more elaborate econometric studies, the regression results indicate that the r – g gap in Canada is affected by international financial and economic conditions, as reflected by the r – g gap in the United States, but also by the public debt to GDP ratio. In particular, a one percentage point increase in the debt to GDP ratio of the federal, provincial, territorial, and local government sector is associated with a 6.7 basis point increase in the Canadian r – g gap. | |
| dc.identifier.citation | Dahlby, B., Ferede, E., and Fuss, J. (2022). The Fiscal Costs of Debt-Financed Government Spending. The Fraser Institute. https://www.fraserinstitute.org/studies/fiscal-costs-of-debt-financed-government-spending | |
| dc.identifier.uri | https://hdl.handle.net/20.500.14078/2931 | |
| dc.language.iso | en | |
| dc.rights | Attribution-NonCommercial-ShareAlike (CC BY-NC-SA) | |
| dc.rights.uri | https://creativecommons.org/licenses/by-nc-sa/4.0/ | |
| dc.subject | debt-financed spending | |
| dc.subject | government spending | |
| dc.title | The fiscal costs of debt-financed government spending | en |
| dc.type | Report |
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