THE IMPACT OF DOMESTIC INVESTORS' PARTICIPATION IN GOVERNMENT DEBT ON BANK LOANS TO THE PRIVATE SECTOR: A CROSS-COUNTRY STUDY

Abstract

This study analyzes the impact of domestic investors' participation in government debt on bank loans to the private sector in advanced and emerging countries. We find that domestic bank participation in government debt has a more profound negative impact on bank loans to the private sector in advanced than in emerging countries. Meanwhile, domestic non-bank participation in government debt only negatively impacts bank loans to the private sector in emerging countries. While both domestic bank and non-bank participation in government debt have a negative impact on bank loans to the private sector in emerging countries, the latter has a weaker impact.