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Crowding-out, home bias and financial stability in the aftermath of the sovereign debt crisis

Author

Listed:
  • Alexie ALUPOAIEI

    (National Bank of Romania, Romania)

  • Matei KUBINSCHI

    (National Bank of Romania, Romania)

  • Eugen RĂDULESCU

    (National Bank of Romania, Romania)

  • Alina ZAHARIA-ROTARU

    (Bucharest University of Economic Studies, Romania)

Abstract

Crowding-out is the phenomenon in which government spending in one sector of the economy crowds out the private sector. This paper calibrates a DSGE model for Romania and then estimates a VAR model for Romania, the Czech Republic, Poland, and Hungary. From this broad perspective, it can be ascertained that risk stemming from unsustainable debt levels is attributed to the entire macro-financial framework and not just to the fiscal sector. The analysis focuses on the period around the sovereign debt crisis, when the crowding-out effect held a pivotal position in the dynamic interplay between public sector borrowing and private investment.

Suggested Citation

  • Alexie ALUPOAIEI & Matei KUBINSCHI & Eugen RĂDULESCU & Alina ZAHARIA-ROTARU, 2024. "Crowding-out, home bias and financial stability in the aftermath of the sovereign debt crisis," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(639), S), pages 107-128, Summer.
    • Handle: RePEc:agr:journl:v:xxxi:y:2024:i:2(639):p:107-128
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    References listed on IDEAS

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