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Global corporate bond issuance: What role for US quantitative easing?

Marco Lo Duca, Giulio Nicoletti and Ariadna Vidal Martínez

Journal of International Money and Finance, 2016, vol. 60, issue C, 114-150

Abstract: The paper analyses the link between global corporate bond issuance and US quantitative easing (QE). It finds that purchases and holdings of MBS and Treasuries by the Fed have a strong impact on gross corporate bond issuance across advanced and emerging economies. The results are robust to a large number of checks, including controlling for the reduced supply of domestic and international bank loans in the aftermath of the global crisis which might have induced the corporate sector to issue more bonds. Our results support the “gap-filling” theory (Greenwood et al., 2010) where corporate bonds replace the assets removed from the market by large scale asset purchases. Specifically, asset holdings and purchases crowded out investors from the markets where the Fed intervened and accelerated portfolio rebalancing across assets and countries leading to stronger corporate bond issuance across the globe. A counterfactual analysis shows that bond issuance in emerging markets since 2009 would have been halved without QE.

Keywords: Monetary policy; Quantitative easing; Spill-overs; Bond issuance; Federal Reserve; Emerging markets (search for similar items in EconPapers)
JEL-codes: E52 E58 F42 G15 (search for similar items in EconPapers)
Date: 2016
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Handle: RePEc:eee:jimfin:v:60:y:2016:i:c:p:114-150