La spesa pubblica per interessi in un sistema a forte intermediazione finanziaria (Public expenditures for interests in system with a high level of financial intermediation)

Abstract

The growth of public expenditures for the payment of interests on various forms of debt in Italy has been very strong in recent years. The payment of interest generates additional pulses, through financing which requires more government bonds and through income which increases consumption. These secondary effects are all the more crucial the more uncertain the sign and size of the total momentum coming from the "financing" side. An important link thus emerges: the effects of income are manifested when the interest on the public debt is paid to agents that are able to consume, which happens when the public deficit is financed by households or businesses. The (positive) effects of wealth also rely on this assumption, due to the greater availability of government bonds. The present study looks at the question of what would happen if these expansive effects were reduced, and financing with government bonds only generated crowding out effects due to consumers not being the holders of the government bonds that finance the deficit.

JEL: H63, E51, G12, E43