State-Owned Banks and Fiscal Discipline

Author/Editor:

Jesus R Gonzalez-Garcia ; Francesco Grigoli

Publication Date:

October 3, 2013

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

State-owned banks may help to soften the financing constraints of public sector entities and consequently become a factor that hampers fiscal discipline. Using a panel dataset, we find that a larger presence of state-owned banks in the banking system is associated with more credit to the public sector, larger fiscal deficits, higher public debt ratios, and the crowding out of credit to the private sector. These results suggest that the lending practices of state-owned banks should be carefully assessed in any strategy to pursue fiscal discipline.

Series:

Working Paper No. 2013/206

Subject:

Commercial banks Credit Government debt management Public sector State-owned banks

English

Publication Date:

October 3, 2013

ISBN/ISSN:

9781484392805/1018-5941

Stock No:

WPIEA2013206

Pages:

26

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