Investigating the Asymmetric Effect of Public Debt on Financial Development in Iran

Document Type : Research Paper

Authors

1 M.Sc. Department of Economics, Bojnord University, Bojnord, Iran

2 Assistant Professor, Department of Economics, Bojnord University, Bojnord, Iran

10.22051/ieda.2024.46282.1402

Abstract

Public debt is a government-related variable that links several successive governments to each other. Each government may have different views and priorities regarding the application of fiscal policies in the economy, including the level or composition of public expenditures. This paper examines the asymmetric effect of public debt on financial development in Iran from 1973-2021. For this, after performing relevant tests and using the Nonlinear Auto Regressive Distributed Lag (NARDL) model, we found that there is a significant negative relationship between positive and negative changes in public debt and financial development in Iran in the long term. Also, the positive change coefficient of public debt is smaller than its negative change coefficient. This means that the reduction of public debt has a greater effect on the development of the financial sector compared to its increase. Additionally, the results showed that the effect of interest rates on financial development is negative and significant

Keywords

Main Subjects

References

 
احسانی، زهرا؛ دشتبان فاروجی، مجید؛ خوشنودی، عبداله و دشتبان فاروجی، سحر. (1402). بررسی اثر نامتقارن سرمایه‌گذاری مستقیم خارجی و مخارج بهداشتی دولت بر سلامت جمعیت در ایران. فصلنامه اقتصاد باثبات، 4(2)، 173-146.
ازوجی، علاءالدین و فرهادی‌کیا، علیرضا. (1386). ارزیابی اثرات سیاست‌های آزادسازی مالی و تغییرات نرخ بهره بانکی بر توسعه بخش مالی در اقتصاد ایران (با استفاده از تکنیک  VECM). فصلنامه پژوهش‌های اقتصادی، 7(4)، 140-119.
زمانی، رضا و مجیدی، مسعود. (1400). تحلیل مقدار بهینه و شرایط آستانه‌ای بدهی‌های دولت در ایران. پژوهش‌های رشد و توسعه اقتصادی، 11(43)، 124-103.
سلمانی، بهزاد؛ اصغرپور، حسین و جلیل‌پور، سالار. (1395). نقش بدهی عمومی و رویکرد سیاستی دولت بر توسعه مالی در ایران. فصلنامه علمی-پژوهشی برنامه‌ریزی و بودجه، 21(1)، 104-83.
سلمانی، یونس، یاوری، کاظم، اصغرپور، حسین و سحابی، بهرام. (1397). اثرات اقتصاد کلان انواع بدهی‌های دولت در ایران. فصلنامه تحقیقات مدل‌سازی اقتصادی، 9(32)، 177-129.
 
References
Alesina, A; & Tabellini, G. (1990). A positive theory of fiscal deficits and government debt. The Review of Economic Studies, 57(3), 403-414.
Altaylıgil, Y. B; & Akkay, R. C. (2013). The effect of the domestic debt on the financial development: A case study for Turkey. International Journal of Economics and Finance, 5(5), 64-74.
Andrés, J; Arce, O; & Thomas, C. (2016). When Fiscal Consolidation Meets Private Deleveraging. Social Science Research Network, Rochester, NY.
Ayadi, R; Arbak, E; Naceur, S. B; & De Groen, W. P. (2015). Determinants of financial development across the Mediterranean. MEDPRO Technical Report No. 29, 159-181.
Bahal, G; Raissi, M; & Tulin, V. (2018). Crowding-out or crowding-in? Public and private investment in India. World Development, 109, 323-333.
Benayed, W; & Gabsi, F. B. (2020). Domestic public debt and financial development in Sub-Saharan Africa: Is there an inverted-U relationship. Economics Bulletin, 40(1), 846-854.
Bordo, M. D; & Meissner, C. M. (2006). The role of foreign currency debt in financial crises: 1880–1913 versus 1972–1997. Journal of Banking & Finance, 30(12), 3299-3329.
Bouyacoub, B; & Belabbas, I. (2022). Empirical analysis of the relationship between public debts, financial system stability and economic growth: the case of Algeria during the period 2000 – 2021. Economy and Environment Review, 5(2), 561-585.
Bua, G; Pradelli, J; & Presbitero, A. F. (2014). Domestic public debt in low-income countries and structure. Review of Development Finance, 4(1), 1-19.
Caballero, R. J; & Krishnamurthy, A. (2004). Fiscal policy and financial depth. NBER Working Paper Series, No. 10532.
Calderón, C; & Liu, L. (2003). The direction of causality between financial development and economic growth. Journal of development economics, 72(1), 321-334.
Chung-Yee, L; Ismail, N. W; & Ai-Lian, T. (2020). Is Public Debt Asymmetrically Link to Financial Development in Malaysia? Asian Journal of Empirical Research, 10(3), 97-110.
De Bonis, R; & Stacchini, M. (2009). What determines the size of bank loans in industrialized countries? The role of government debt. MoFiR working paper, Bank of Italy, Economics, Research and International Relations.
Ehsani, Z; Dashtban Farouji, M; Khoshnoodi, A; & Dashtban Farouji, S. (2023). Investigating the asymmetric effect of foreign direct investment and government health expenditure on population health in Iran. Stable Economy Journal, 4(2), 146-173. (In Persian).
Emran, M. S; & Farazi, S. (2009). Lazy banks? Government borrowing and private credit in developing countries. Institute for International Economic Policy Paper Series, No. 2009-9.
Ezoji, A; & Farhadikia, A. R. (2008). Evaluation of Financial Linearization
Impact and Changing Interest Rate of Banking on Financial Sector Development
in IRAN (Using VECM Technique). The Economic Research, 7(4), 119-140.
(In Persian).
Hauner, D. (2009). Public debt and financial development. Journal of Development Economics, 88(1), 171-183.
İlgün, M. F. (2016). Financial Development and Domestic Public Debt in Emerging Economies: A Panel Cointegration Analysis. Journal of Applied Economics and Business Research, 6(4), 284-296.
Janda, K; & Kravtsov, O. (2017). Time-varying effects of public debt on the financial and banking development in the Central and Eastern Europe. Munich Personal RePEc Archive, 6 March, 2017, pp: 1-16.
Kabir Hassan, M; Sanchez, B; & Yu, J. S. (2011). Financial development and economic growth: New evidence from panel data. The Quarterly Review of Economics and Finance, 51(1), 88-104.
Kumhof, M; & Tanner, E. (2008). Government Debt: A Key Role in Financial Intermediation. IMF Working Paper, WP/05/57.
Kutivadze, N. (2011). Public Debt and Financial Development. Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano. Working Paper n. 2011-13.
Lau, S. Y; Tan, A. L; & Liew, C. Y. (2019). The asymmetric link between public debt and private investment in Malaysia. Malaysian Journal of Economic Studies, 56(2), 327-342.
McKinnon, R.I. (1973). Money and Capital in Economic Development. The Brookings Institution, Washington, DC.
Montes, C. P. (2013). The impact of interbank and public debt markets on the competition for bank deposits. The Spanish Review of Financial Economics, 11(2), 57-68.
Ondo, A. (2017). Public debt and financial stability: The case of economic community and monetary union of central Africa (EMCCA). Journal of Economics and International Finance, 9(9), 89-94.
Patrick, H. T. (1966). Financial development and economic growth in underdeveloped countries. Economic development and Cultural change, 14(2), 174-189.
Salmani, B; Asgharpour, H; & Jalilpour, S. (2016). The Effect of Government Policies and Public Debt on Financial Development in Iran. Journal of Planning and Budgeting, 21(1), 83-104. (In Persian).
Salmani, Y; Yavari, K; Sahabi, B; & Asgharpour, H. (2018). The Macroeconomic Effects of Government Debt in Iran. Journal of Economic Modeling Research, 9(32), 129-177. (In Persian).
Schumpeter, J.A. (1911). The Theory of Economic Development. Harvard University Press, Cambridge, MA.
Sekmen, T; Doğan, E; & Topuz, S. G. (2020). The Crowding Out Effect of Domestic Public Debt on Financial Development in Turkey. Journal of Yasar University, 15(59), 544-559.
Shaw, E.S. (1973). Financial Deepening in Economic Development. Oxford University Press, London and New York.
Shin, Y; Yu, B; & Greenwood-Nimmo, M. (2014). Modelling Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear ARDL Framework. In: Sickles, R; Horrace, W. (eds) Festschrift in Honor of Peter Schmidt. Springer, New York, NY.
Zamani, R; & Majidi, M. (2021). Optimum and Threshold Rates of Government Debt in Iran. Economic Growth and Development Research, 11(43), 124-103. (In Persian).

Files

Share

How to cite

Statistics