بدهی های عمومی و توسعه مالی

We examine the role of public debt in financial development. The literature has highlighted its supportive role through providing collateral and benchmark. We contrast this “safe asset” view to a “lazy banks” view: developing banking sectors that lend mainly to the public sector may develop more slowly, because it could make banks profitable but inefficient. Results from country-level and bank-level regressions are more supportive of the “lazy banks” view, but the “safe asset” view seems to play a role at moderate levels of public debt held by banks. There is also evidence of a harmful interaction between public debt and financial repression.

A large literature has examined the institutional determinants of financial development (e.g., Claessens and Laeven, 2003 and Detragiache et al., 2005) and the relationship between financial development and economic growth (e.g., Christopoulos and Tsionas, 2004, King and Levine, 1993, Levine, 1997 and Rajan and Zingales, 1998). However, less work has been done on the macroeconomic determinants of financial development: what has been shown is that financial development is undermined by inflation (Boyd et al., 2001) and that financial openness can support financial development if the appropriate institutional requirements are in place (Chinn and Ito, 2006).1 This paper examines the effects of public debt on financial development, an aspect that, while frequently discussed in policy circles, has received scant attention in the academic literature. Most often, the role of public debt in financial development has been thought of in terms of a positive role it can play in developing financial sectors by providing a relatively safe asset; we will call this the “safe asset” view. In contrast, and as the main contribution of this paper to the literature, we propose what we will call a “lazy banks” view: developing banking sectors holding large public debt may progress more slowly, because banks that mainly lend to the public sector could become too complacent to have the drive to develop the banking market under the difficult conditions in developing countries. Note that “lazy” does not imply a value judgment here, as it reflects rational behavior on the part of the banks. While often quoted in policy circles, this view has been absent from the academic literature.2 Note that there could also be room for non-linearities and interactions: public debt may be helpful for financial development up to a threshold, beyond which it may become harmful. Moreover, whether public debt exerts a negative effect on financial development may depend on whether the financial system is liberalized or remains repressed.

This paper examined a neglected angle of financial development: the role of public debt. Its main contribution is the proposition of a “lazy banks” view that emphasizes the potentially negative implications of public sector credit in repressed banking systems, contrasting with the more traditional “safe asset” view that underlines the positive contribution of public debt to financial development. The results from bank-level and country-level regressions are overall more favorable to the “lazy banks” view. Greater public debt holding by domestic banks raises their profitability but reduces their efficiency if public debt exceeds a certain threshold or if it interacts with financial repression. Moreover, it diminishes financial deepening over time. However, we do find some support for the “safe asset” view for limited shares of public sector credit.