Here is an interesting paragraph which describes how a cut in government debt can lead to lower borrowing cost in the economy:
A decrease in the supply of government debt has forced some money fund managers and cash investors to scramble for alternatives. Higher demand for commercial paper, repurchase agreements and other short-term private debt has knocked down borrowing costs on Wall Street. [US expects to pay down debt in Q2 for first time since 2007. Reuters. April 29 2013]
How about that? A clear crowding out (or rather, crowding in) effect between the public and the private sectors.
One reply on “[2681] Government debt cut reduces borrowing cost in the economy”
Except that in Malaysia, reducing govt debt would probably lead to capital outflows lol