Crowding-out effect It is related to the issuance of public debt on a large scale.
In cases where the public deficit is high and, therefore, a large amount of debt has to be issued, the State has to compete with companies to attract savings. Therefore, the issuance of public debt will be done at different rates. of interest that make it attractive in the eyes of investors.
Its most immediate consequence is a rise in interest rates, making it more difficult and expensive to finance business investment.
This is what is called "crowding out", that is, the expulsion of the private sector from the economy by the public sector.
|Terms related to crowding-out (expulsion effect)|
|Definition of expulsion effect or crowding out. Public sector. Public sector financing. Public debt. Interest rates|