TY - JOUR
T1 - The effects of foreign borrowing policies on economic growth
T2 - Success or failure?
AU - Wang, Fuhmei
N1 - Funding Information:
The author is thankful to the National Science Council in Taiwan for the financial support under Contract NSC 92-2415-H-006-003 and the grant from 2009–2010 Fulbright research awards. The usual disclaimer applies.
PY - 2009
Y1 - 2009
N2 - Foreign savings closely interact with economic performance. External loans are partly influenced by the government's attempt to balance its budget. This study investigates the relationship between public sector foreign borrowing and economic growth. Results indicate that only under circumstances of (1) moderate income tax rates to guarantee the solvency of external loans and (2) households having the patience to substitute consumption between different periods can domestic government finance fiscal deficits by borrowing abroad, and thereby enhance investment and economic growth. Otherwise, additional foreign borrowing is associated with higher indebtedness and slower economic growth.
AB - Foreign savings closely interact with economic performance. External loans are partly influenced by the government's attempt to balance its budget. This study investigates the relationship between public sector foreign borrowing and economic growth. Results indicate that only under circumstances of (1) moderate income tax rates to guarantee the solvency of external loans and (2) households having the patience to substitute consumption between different periods can domestic government finance fiscal deficits by borrowing abroad, and thereby enhance investment and economic growth. Otherwise, additional foreign borrowing is associated with higher indebtedness and slower economic growth.
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U2 - 10.1080/17487870903314567
DO - 10.1080/17487870903314567
M3 - Article
AN - SCOPUS:72349087265
SN - 1748-7870
VL - 12
SP - 273
EP - 284
JO - Journal of Economic Policy Reform
JF - Journal of Economic Policy Reform
IS - 4
ER -