Cost of Borrowing, Institutional Quality, and Capital Openness

Gabriel Martínez

No 1001, Working Papers from Ave Maria University, Department of Economics

Abstract: Does improving institutional quality lower borrowing costs or raise them? Better institutions the marginal productivity of capital, the demand for funds and the interest rate. They may also lending risks, raising the supply of funds and lowering the cost of capital. Using data from 100 this paper shows that the impact of institutional quality on borrowing costs depends on whether country has favored improving financial institutions, which is proxied by its openness to capital flows, controlling for a host of factors. These results are robust to changes in definitions and specification.

Keywords: interest rates; institutional quality (search for similar items in EconPapers)
JEL-codes: E44 F34 F36 O16 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2010-07
New Economics Papers: this item is included in nep-ifn
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Citations: View citations in EconPapers (1)

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