The fiscal costs of debt-financed government spending

Simple item page
dc.contributor.authorDahlby, Bev
dc.contributor.authorFerede, Ergete
dc.contributor.authorFuss, Jake
dc.date.accessioned2023-01-31T16:46:49Z
dc.date.available2023-01-31T16:46:49Z
dc.date.issued2022
dc.description.abstractIn 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.citationDahlby, 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.urihttps://hdl.handle.net/20.500.14078/2931
dc.language.isoen
dc.rightsAttribution-NonCommercial-ShareAlike (CC BY-NC-SA)
dc.rights.urihttps://creativecommons.org/licenses/by-nc-sa/4.0/
dc.subjectdebt-financed spending
dc.subjectgovernment spending
dc.titleThe fiscal costs of debt-financed government spending
dc.typeReport
Files
Original bundle
Now showing 1 - 1 of 1
Thumbnail Image
Name:
Dahlby-fiscal-costs-of-debt-financed-government-spending.pdf
Size:
868.34 KB
Format:
Adobe Portable Document Format
Description:
Download
Collections
Department of Anthropology, Economics and Political Science