THE IMPACT OF GOVERNMENT DEBT ISSUANCE ON SHORT-TERM INTEREST RATES IN INDONESIA*
This paper analyzes whether the expansionary fiscal policy funded by issuing debt instruments in financial markets will increase short-term interest rates. If the expansionary fiscal policy increases interest rates, which decrease private spending especially investment, crowding out occurs. This is...
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| Format: | Article |
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[Yogyakarta] : Universitas Gadjah Mada
2009
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| _version_ | 1826033210463617024 |
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| author | Perpustakaan UGM, i-lib |
| author_facet | Perpustakaan UGM, i-lib |
| author_sort | Perpustakaan UGM, i-lib |
| collection | UGM |
| description | This paper analyzes whether the expansionary fiscal policy
funded by issuing debt instruments in financial markets will increase
short-term interest rates. If the expansionary fiscal policy increases
interest rates, which decrease private spending especially investment,
crowding out occurs. This is interesting because global
economic crisis has encouraged many countries to run large budget
deficits to stimulate the economy. Indonesia has also run budget
deficit during this crisis and even in years before. The impact of such
a policy can be significant because Indonesia�s debt market is still
narrow and shallow. Therefore, its capability of absorbing the
government debt instruments without influencing the private sector
funding is limited. This study tests whether the crowding out occurs
in Indonesia using a time series econometric model inspired by
Cebula and Cuellar�s model. The Cointegration Regression and
Error Correction Model (ECM) are used in this study. Monthly data
from April 2000 to December 2008 are used for overnight real
interbank call money interest rates, real net government bond issues
in trading, real narrow money supply, real rate of one-month Certificate of Bank Indonesia, growth of Gross Domestic Product,
and real net international capital flows. This empirical study shows
that the crowding out problem occurred in Indonesia during the
period. This indicates that financing budget deficit in Indonesia by
issuing debt instruments in the financial markets has a negative
impact on the private sector. |
| first_indexed | 2024-03-13T19:06:34Z |
| format | Article |
| id | oai:generic.eprints.org:28354 |
| institution | Universiti Gadjah Mada |
| last_indexed | 2024-03-13T19:06:34Z |
| publishDate | 2009 |
| publisher | [Yogyakarta] : Universitas Gadjah Mada |
| record_format | dspace |
| spelling | oai:generic.eprints.org:283542014-06-18T00:24:26Z https://repository.ugm.ac.id/28354/ THE IMPACT OF GOVERNMENT DEBT ISSUANCE ON SHORT-TERM INTEREST RATES IN INDONESIA* Perpustakaan UGM, i-lib Jurnal i-lib UGM This paper analyzes whether the expansionary fiscal policy funded by issuing debt instruments in financial markets will increase short-term interest rates. If the expansionary fiscal policy increases interest rates, which decrease private spending especially investment, crowding out occurs. This is interesting because global economic crisis has encouraged many countries to run large budget deficits to stimulate the economy. Indonesia has also run budget deficit during this crisis and even in years before. The impact of such a policy can be significant because Indonesia�s debt market is still narrow and shallow. Therefore, its capability of absorbing the government debt instruments without influencing the private sector funding is limited. This study tests whether the crowding out occurs in Indonesia using a time series econometric model inspired by Cebula and Cuellar�s model. The Cointegration Regression and Error Correction Model (ECM) are used in this study. Monthly data from April 2000 to December 2008 are used for overnight real interbank call money interest rates, real net government bond issues in trading, real narrow money supply, real rate of one-month Certificate of Bank Indonesia, growth of Gross Domestic Product, and real net international capital flows. This empirical study shows that the crowding out problem occurred in Indonesia during the period. This indicates that financing budget deficit in Indonesia by issuing debt instruments in the financial markets has a negative impact on the private sector. [Yogyakarta] : Universitas Gadjah Mada 2009 Article NonPeerReviewed Perpustakaan UGM, i-lib (2009) THE IMPACT OF GOVERNMENT DEBT ISSUANCE ON SHORT-TERM INTEREST RATES IN INDONESIA*. Jurnal i-lib UGM. http://i-lib.ugm.ac.id/jurnal/download.php?dataId=11417 |
| spellingShingle | Jurnal i-lib UGM Perpustakaan UGM, i-lib THE IMPACT OF GOVERNMENT DEBT ISSUANCE ON SHORT-TERM INTEREST RATES IN INDONESIA* |
| title | THE IMPACT OF GOVERNMENT DEBT ISSUANCE ON SHORT-TERM INTEREST RATES IN INDONESIA* |
| title_full | THE IMPACT OF GOVERNMENT DEBT ISSUANCE ON SHORT-TERM INTEREST RATES IN INDONESIA* |
| title_fullStr | THE IMPACT OF GOVERNMENT DEBT ISSUANCE ON SHORT-TERM INTEREST RATES IN INDONESIA* |
| title_full_unstemmed | THE IMPACT OF GOVERNMENT DEBT ISSUANCE ON SHORT-TERM INTEREST RATES IN INDONESIA* |
| title_short | THE IMPACT OF GOVERNMENT DEBT ISSUANCE ON SHORT-TERM INTEREST RATES IN INDONESIA* |
| title_sort | impact of government debt issuance on short term interest rates in indonesia |
| topic | Jurnal i-lib UGM |
| work_keys_str_mv | AT perpustakaanugmilib theimpactofgovernmentdebtissuanceonshortterminterestratesinindonesia AT perpustakaanugmilib impactofgovernmentdebtissuanceonshortterminterestratesinindonesia |