Public Debt Management and Its Spillover Effects on Domestic Personal Investment Decisions: A Literature Review

Authors

  • Daniel Santo Padilla Garcia Author
  • Leandro Jorge Yacoubian Author

DOI:

https://doi.org/10.51473/rcmos.v2i2.2022.1097

Keywords:

Crowding-out effect; Fiscal credibility; Household investment; Public debt management; Sovereign risk

Abstract

This literature review comprehensively examines studies published up to 2022 on the relationship between public debt management and its spillover effects on domestic personal investment decisions. Although considerable research has explored the macroeconomic impacts of sovereign debt accumulation, limited attention has been given to how government borrowing strategies indirectly shape household portfolio choices, risk preferences, and long-term wealth formation. This review systematically analyzes empirical and theoretical contributions addressing debt structure, fiscal sustainability, interest rate dynamics, and investor sentiment. The evidence suggests that high or poorly managed public debt levels increase market volatility and borrowing costs, which can crowd out private investment by diverting domestic savings and raising uncertainty. In contrast, sound and transparent debt management strengthens investor confidence and promotes household participation in capital markets. By highlighting key findings, theoretical approaches, and gaps in the existing literature, this paper clarifies how sovereign debt policies influence individual financial behavior. The review concludes with directions for future research and policy considerations to align sustainable fiscal practices with the goal of encouraging resilient personal investment within domestic markets.

Downloads

Download data is not yet available.

Author Biographies

  • Daniel Santo Padilla Garcia

     – Instituto Federal do Ceará (IFCE)

    Especialização em Gestão Pública pela Faculdade Educacional da Lapa, Brasil (2015) Graduação em Ciências Contábeis (2016) e Gestão Financeira (2014), ambas pela Universidade Estácio de Sá.

    Especialista em Gestão Financeira Pública | Líder em Aquisições Governamentais | Foco em ESG, e Inovação no Setor Público Servidor Público Federal

  • Leandro Jorge Yacoubian

    -Universidad Siglo 21

     Bacharel em Administração de Empresas (2021)

References

Abbas, S. M. A., Pienkowski, A., & Rogoff, K. (2014). Sovereign debt: A guide for economists and practitioners. International Monetary Fund. https://doi.org/10.5089/9781484364417.071

Aizenman, J., & Jinjarak, Y. (2010). De facto fiscal space and fiscal stimulus: Definition and assessment. IMF Economic Review, 58(2), 227–255. https://doi.org/10.1057/imfer.2010.10 DOI: https://doi.org/10.3386/w16539

Aizenman, J., & Marion, N. (2011). Using inflation to erode the US public debt. Journal of Macroeconomics, 33(4), 524–541. https://doi.org/10.1016/j.jmacro.2011.08.003 DOI: https://doi.org/10.1016/j.jmacro.2011.09.001

Alesina, A., Favero, C. A., & Giavazzi, F. (2019). Austerity: When it works and when it doesn’t. Princeton University Press. https://doi.org/10.1515/9781400892385 DOI: https://doi.org/10.2307/j.ctvc77f4b

Baldacci, E., & Kumar, M. S. (2010). Fiscal deficits, public debt, and sovereign bond yields. IMF Working Papers, 2010(184). https://doi.org/10.5089/9781455202189.001

Barro, R. J. (1974). Are government bonds net wealth? Journal of Political Economy, 82(6), 1095–1117. https://doi.org/10.1086/260266 DOI: https://doi.org/10.1086/260266

Calderón, C., & Schmidt-Hebbel, K. (2008). Business cycles and fiscal policies: The role of institutions and financial markets. In Fiscal Policy, Stabilization and Growth: Prudence or Abstinence? (pp. 99–138). World Bank. https://doi.org/10.1596/978-0-8213-7369-4

Checherita-Westphal, C., & Rother, P. (2012). The impact of high government debt on economic growth and its channels: An empirical investigation for the euro area. European Economic Review, 56(7), 1392–1405. https://doi.org/10.1016/j.euroecorev.2012.06.007 DOI: https://doi.org/10.1016/j.euroecorev.2012.06.007

Corsetti, G., Kuester, K., Meier, A., & Müller, G. J. (2013). Sovereign risk, fiscal policy, and macroeconomic stability. The Economic Journal, 123(566), F99–F132. https://doi.org/10.1111/ecoj.12013 DOI: https://doi.org/10.1111/ecoj.12013

Eberhardt, M., & Presbitero, A. F. (2015). Public debt and growth: Heterogeneity and non-linearity. Journal of International Economics, 97(1), 45–58. https://doi.org/10.1016/j.jinteco.2015.04.005 DOI: https://doi.org/10.1016/j.jinteco.2015.04.005

Égert, B. (2015). The 90% public debt threshold: The rise and fall of a stylized fact. Applied Economics, 47(34–35), 3756–3770. https://doi.org/10.1080/00036846.2015.1021462 DOI: https://doi.org/10.1080/00036846.2015.1021463

Elmendorf, D. W., & Mankiw, N. G. (1999). Government debt. In J. B. Taylor & M. Woodford (Eds.), Handbook of Macroeconomics (Vol. 1, pp. 1615–1669). Elsevier. https://doi.org/10.1016/S1574-0048(99)10032-0 DOI: https://doi.org/10.1016/S1574-0048(99)10038-7

Gough, D., Oliver, S., & Thomas, J. (2017). An introduction to systematic reviews (2nd ed.). SAGE Publications. https://doi.org/10.4135/9781526402271 DOI: https://doi.org/10.53841/bpsptr.2017.23.2.95

International Monetary Fund (IMF). (2013). Guidelines for Public Debt Management. International Monetary Fund. https://doi.org/10.5089/9781484324701.071

Kumar, M. S., & Woo, J. (2010). Public debt and growth. IMF Working Papers, 2010(174). https://doi.org/10.5089/9781455201854.001

Mbaye, S., Moreno Badia, M., & Chae, K. (2018). Global debt database: Methodology and sources. IMF Working Papers, 2018(111). https://doi.org/10.5089/9781484353992.001 DOI: https://doi.org/10.5089/9781484353592.001

Missale, A. (2012). Sovereign debt management and fiscal vulnerabilities. Centre for Economic Policy Research (CEPR) Discussion Paper No. DP9045. https://doi.org/10.2139/ssrn.2132342 DOI: https://doi.org/10.2139/ssrn.2132342

Palmatier, R. W., Houston, M. B., & Hulland, J. (2018). Review articles: Purpose, process, and structure. Journal of the Academy of Marketing Science, 46(1), 1–5. https://doi.org/10.1007/s11747-017-0563-4 DOI: https://doi.org/10.1007/s11747-017-0563-4

Panizza, U., & Presbitero, A. F. (2014). Public debt and economic growth: Is there a causal effect? Journal of Macroeconomics, 41, 21–41. https://doi.org/10.1016/j.jmacro.2014.03.009 DOI: https://doi.org/10.1016/j.jmacro.2014.03.009

Reinhart, C. M., & Rogoff, K. S. (2010). Growth in a time of debt. American Economic Review, 100(2), 573–578. https://doi.org/10.1257/aer.100.2.573 DOI: https://doi.org/10.1257/aer.100.2.573

Reinhart, C. M., Reinhart, V. R., & Rogoff, K. S. (2012). Public debt overhangs: Advanced-economy episodes since 1800. Journal of Economic Perspectives, 26(3), 69–86. https://doi.org/10.1257/jep.26.3.69 DOI: https://doi.org/10.1257/jep.26.3.69

Sachs, J. D. (1989). The debt overhang of developing countries. In G. Calvo, R. Findlay, P. Kouri, & J. Macedo (Eds.), Debt, Stabilization and Development: Essays in Memory of Carlos Diaz-Alejandro (pp. 80–102). Basil Blackwell.

Simo-Kengne, B. D., Bittencourt, M., & Gupta, R. (2015). Sovereign risk and private savings behavior in South Africa. Emerging Markets Finance and Trade, 51(1), 182–194. https://doi.org/10.1080/1540496X.2015.1011534 DOI: https://doi.org/10.1080/1540496X.2015.1011534

Tranfield, D., Denyer, D., & Smart, P. (2003). Towards a methodology for developing evidence‐informed management knowledge by means of systematic review. British Journal of Management, 14(3), 207–222. https://doi.org/10.1111/1467-8551.00375 DOI: https://doi.org/10.1111/1467-8551.00375

Woo, J., Bova, E., Kinda, T., & Zhang, Y. S. (2013). Distributional effects of fiscal consolidation and the role of fiscal policies. IMF Working Paper No. 13/195. https://doi.org/10.5089/9781484336780.001 DOI: https://doi.org/10.5089/9781484390917.001

Downloads

Additional Files

Published

2022-08-25

Issue

Vol. 2 No. 2 (2022): August to December 2022 Edition – Volume 2, Number 2, RCMOS – Multidisciplinary Scientific Journal O Saber

Section

Reviews

Categories

License

Copyright (c) 2022 Daniel Santo Padilla Garcia, Leandro Jorge Yacoubian (Autor)

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

This work is licensed under the Creative Commons Attribution 4.0 International License (CC BY 4.0). This means you are free to:

  • Share — copy and redistribute the material in any medium or format.
  • Adapt — remix, transform, and build upon the material for any purpose, even commercially.

The use of this material is conditioned upon proper attribution to the original author(s), providing a link to the license, and indicating if changes were made. The license does not require permission from the author or the publisher as long as these conditions are met.

The Creative Commons license logo is displayed permanently in the footer of the journal.

The copyright of the manuscript can be retained by the authors without restrictions and can be requested at any time, even after publication in the journal.

How to Cite

GARCIA, Daniel Santo Padilla; YACOUBIAN, Leandro Jorge. Public Debt Management and Its Spillover Effects on Domestic Personal Investment Decisions: A Literature Review. Multidisciplinary Scientific Journal The Knowledge, Brasil, v. 2, n. 2, 2022. DOI: 10.51473/rcmos.v2i2.2022.1097. Disponível em: https://submissoesrevistarcmos.com.br/rcmos/article/view/1097. Acesso em: 5 sep. 2025.