국가부채와 외국인 증권투자자금

Public debt is snowballing in many countries recently due to the COVID-19 shock. The enlarged public debts are likely to yield a major influence on international capital flows in the aftermath of the crisis. Nevertheless, there has been little to no study on the effect of public debt on international capital flows. Theoretically, public debt may affect foreign portfolio inflows through various channels. It may induce more incoming portfolio investment through higher interest rates or by developing capital markets. On the other hand, it may deter inflows by increasing credit risk or crowding-out credit to the private sector. We study whether and how public debt affects gross portfolio inflows using a panel dataset of 30 OECD countries over 1970-2015. To identify the causal effect, we use the social expenditure-to-GDP ratio as an instrument for public debt. Social expenditure is highly correlated with public debt, but it is not directly related to capital flows, particularly not to the gross portfolio investment, which we are investigating. Thus we can verify causation by examining whether the part of public debt variation explained by social expenditure is closely associated with the gross portfolio inflows. We also reference the previous literature about public debt and growth on the set-up of analysis detail. We find from fixed-effects panel regressions that the public debt-to-GDP ratio is negatively associated with per capita gross portfolio inflows. The instrumental variable approach reveals causation: One percentage point higher public debt-to-GDP ratio reduces per capita gross portfolio inflow over the next five years by 7 percent. We further investigate the volatility of gross portfolio inflows by measuring them using standard deviations of quarterly inflows. The result is that public debt is positively related to the capital flow volatility (OLS), and it can also be interpreted as a causal effect (IV). This paper provides the first empirical evidence on the negative influence of public debt on gross portfolio inflow amount and volatility. In coping with the recession, policymakers need to take caution on public debt. More efforts are needed to maximize policy efficiency.