Does Government Debt Crowd Out Investment ? A Bayesian DSGE Approach

  title={Does Government Debt Crowd Out Investment ? A Bayesian DSGE Approach},
  author={Nora Traum},
  • Nora Traum
  • Published 2010
We estimate the crowding-out effects of government debt for the U.S. economy using a New Keynesian model with a detailed fiscal specification. The estimation accounts for the interaction between monetary and fiscal policies. Whether private investment is crowded in or out in the short term depends on the fiscal or monetary shock that triggers debt expansion. Contrary to the conventional view of crowding out, no systematic relationship among debt, the real interest rate, and investment exists… CONTINUE READING


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