Interest rates affect public expenditure growth

Peña, Guillermo (Universidad de Zaragoza)

Resumen: The aim of this paper is to analyze interest rates and public spending to provide policy implications. Concretely, it explores the influence of these rates on public expenditure growth as opposite to the traditional direction view, dealing with 216 countries for the 1972–2021 period and estimating system GMM models. A balanced subsample is used for assessing Granger causality through a recent panel technique. The results are robust for the used dependent and target variables and also the methodology. They show that decreasing interest rates are associated with—and in some cases also lead to—lower per capita public expenditure growth. These results can be interpreted as a twofold effect of shifts in relative prices—through fiscal illusion—and of crowding out of private investment with respect to the public sector.

Idioma: Español

DOI: 10.3934/QFE.2023030

Año: 2023

Publicado en: Quantitative finance and economics 7, 4 (2023), 622-645
ISSN: 2573-0134

Factor impacto CITESCORE: 0.3 - Finance (Q4) - Business, Management and Accounting (miscellaneous) (Q4) - Economics, Econometrics and Finance (miscellaneous) (Q4) - Strategy and Management (Q4)

Factor impacto SCIMAGO: 0.0 - Business, Management and Accounting (miscellaneous) - Strategy and Management - Finance - Economics, Econometrics and Finance (miscellaneous)

Financiación: info:eu-repo/grantAgreement/ES/DGA/S39-23R
Financiación: info:eu-repo/grantAgreement/ES/MICINN/PID2020-112773GB-I00
Financiación: info:eu-repo/grantAgreement/ES/UZ/JIUZ-2022-CSJ-19

Tipo y forma: Article (Published version)

Área (Departamento): Área Fund. Análisis Económico (Dpto. Análisis Económico)