Foreign capital flows, credit spreads, and the business cycle
Ding Du and
Journal of International Financial Markets, Institutions and Money, 2018, vol. 57, issue C, 59-79
Previous studies have found that foreign capital flows into the US Treasury and corporate-bond markets drive US long-term interest rates. In this paper, we extend the literature by showing that (1) foreign capital flows also drive the US risk structure of interest rates (i.e., credit spreads), and (2) the impacts of foreign capital flows through the credit spread on corporate financing and investment as well as aggregate economic activities are significant, even outside of the Global Financial Crisis period.
Keywords: Foreign capital flows; Credit spreads; Corporate financing and investment; Global savings glut; Global banking glut (search for similar items in EconPapers)
JEL-codes: E43 F21 G30 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:57:y:2018:i:c:p:59-79
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