Economics, Econometrics and Finance
8 years ago

Government debt increases demand for money, impacting private spending.

Journal of Monetary Economics
Outside wealth, the demand for money and the crowding out effect
James L. Butkiewicz

Paper Summary

The study found that government debt held by the public does increase the demand for money, contrary to what large macroeconometric models suggest. This means that debt-financed government spending may have a crowding out effect on private spending, impacting the economy differently than previously thought.

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