Monday, 27 February 2017

The crowding out effect from the European debt crisis perspective: Eurozone experience

an article by Baki Demirel and İlhan Eroğlu (Gaziosmanpasa University, Tokat, Turkey) and Cumhur Erdem (Abant İzzet Baysal University, Bolu, Turkey) published in International Journal of Sustainable Economy Volume 9 Number 1 (2017)


The present study aims to measure the crowding out effect for the countries in the Eurozone that have tried to finance budget deficits through borrowing. We have examined the effects of government debt, government expenditure, interest rate and growth rate on private investments for the 2000-2015 period.

The results show that government debt, government expenditure, interest rates and budget deficits all affect private investment negatively and the impact of economic growth is positive.

The findings of the study support the existence of the crowding out effect in the Eurozone for the period of 2000-2015.

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