We explain the puzzle of falling firm leverage during the period of decreasing aggregate volatility from 1970 – 2010 with a simultaneous increase in firm level volatility and varying degrees of firm access to public debt markets. By incorporating friction between public and private debt, a structural model where firms make financing policy decisions in presence of uncertainty can explain a sign...

This paper explores the impact of nationally held public debt and foreign debt on the US economy. It has tried to define the nationally held public debt as an additional asset for the private sector by insuring a source of future saving, an increase in investment capacity and a source of increase in demand. A linear regression analysis of 39 observations from 1970 to 2014, using different lengt...

While public debt has risen in the last two decades, return that it offers to investors fallen, especially relative on private investment. This creates a revenue for government as supplier of special services offered by bonds, which include storage value, safety, liquidity, and reprieve from repression. The present value this is large stock debt, keeping sustainable even primary balances zero o...

Excessive borrowing by subnational governments due to soft budget constraints and intergovernmental coordination failures might be one of the perils of decentralization. Despite a large body of case studies, empirical investigations on whether decentralization increases consolidated public debt levels are still scarce. This paper contributes to the literature by exploring econometrically for se...

The worldwide growth slowdown after 1975 was a major negative fiscal shock; lower growth lowers the present value of tax revenues and primary surpluses and thus makes a given level of debt more burdensome. Most countries failed to adjust to the negative fiscal consequences of the growth implosion and so public debt to GDP ratios exploded. The growth slowdown therefore played an important role i...

We study the effects on economic activity of a pure temporary change in government debt and relationship between multiplier level an overlapping generations framework. The is positive but quite small during normal times while it much larger crises. Moreover, increases with steady state debt. Hence, call for fiscal consolidation recessions seems ill-advised. Finally, rise debt-to-GDP real intere...

We provide a comprehensive assessment of the relationship between public debt and GDP growth in the postwar advanced economies. We use the timing of changes in public debt and growth to account for endogeneity, and find little evidence of a negative relationship. Semi-parametric estimates do not indicate any threshold effects. Finally, we reconcile our results with four recent, influential pape...

We examine the relation between a borrowing firm’s ownership structure and its choice of debt source using a novel, hand-collected data set on corporate ownership, control and debt structures for 9,831 firms in 20 countries from 2001 to 2010. We find that the divergence between control rights and cash-flow rights of a borrowing firm’s largest ultimate owner has a significant impact on the firm’...