The Impact of Domestic Investors’ Participation in Government Debt on Bank Loans to the Private Sector: A Cross-Country Study

Abstract

This study analyzes the impact of domestic investors’ participation in government debt on bank loans to the private sector in advanced and emerging countries. We find that domestic bank participation in government debt has a more profound negative impact on bank loans to the private sector in advanced than in emerging countries. Meanwhile, domestic non-bank participation in government debt only negatively impacts bank loans to private sector in emerging countries. While both domestic bank and non-bank participation in government debt have a negative impact on bank loans to the private sector in emerging countries, the latter has a weaker impact.

Beyond the Crisis: Tracking SME Non-Performing Loan in Indonesia Before and After the COVID-19 Stimulus

“…Examining the relationship between non-performing loans and macroeconomic performance offers insights into the systemic risks and economic conditions contributing to the accumulation of non-performing assets in the banking sector (Radivojević & Jovovic, 2017). The influence of non-performing loans on banks' profitability and financial performance underscores the necessity for robust risk management practices and regulatory oversight to uphold the stability of the banking system (Lafuente et al, 2019) (Adamanti et al, 2022).…”