An Exploration of the Relationship Between Private and Public Finance and the Real Economy at the International, Regional, and Local Level

Questions related to the role that the financial sector plays in the growth and stability of economies at various levels of aggregation are explored through the lenses of both public and private financial attributes and instruments. The first chapter explores the development of models built for the purpose of explaining the variation in the recessionary impact from the 2008-09 financial crisis across countries. Using empirical techniques that address model uncertainty and parameter heterogeneity, evidence is provided that a relatively consistent and robust cross-country model can be developed while explicitly controlling for parameter heterogeneity. The second chapter investigates the role varying levels of state government public debt may play in the long-run growth performance of U.S. state economies. Using neoclassical growth regressions and public finance data, it is found that state government debts have not interfered with the long-run growth of state economies over the sample period. The final chapter follows a similar investigation looking at the impact of public debts on city economies. Using pooled and fixed effects regressions, evidence is provided that debt shares as well as absolute debt levels are negatively associated with city and MSA growth rates.