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Journal of Finance & Economics Research - Volume 4, Issue 2 2019
By Sajjad Zaheer, Fatima Khaliq, Muhammad Rafiq
10.20547/jfer1904203
We investigate the impact of government borrowing from the scheduled banks on the credit to private sector in Pakistan, using monthly data from 1998:M6 to 2015:M12. We find that a one percentage point growth in the government borrowing leads to 8 basis points crowding out of the private sector credit in four months. Albeit small, there is negative impact of government borrowing on the private sector credit. The results remain unchanged even after implementation of the interest rate corridor since August 2009.