Bond finance, bank credit, and aggregate fluctuations in an open economy

Roberto Chang, Andrés Fernández and Adam Gulan

Journal of Monetary Economics, 2017, vol. 85, issue C, 90-109

Abstract: Corporate sectors in emerging markets have noticeably increased their reliance on foreign financing, presumably reflecting low global interest rates. The evidence also shows a rebalancing from bank loans towards bonds. To study these developments, we develop a dynamic open economy model where these modes of finance are determined endogenously. The model replicates the stylized facts following a drop in world interest rates; in particular, rebalancing towards bonds occurs because bank credit becomes relatively more expensive, reflecting the scarcity of bank equity. More generally, the model is suitable for studying interactions between modes of finance and the macroeconomy.

Keywords: Emerging markets; Corporate debt; Bonds; Bank credit (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (29)

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Related works:
Working Paper: Bond Finance, Bank Credit, and Aggregate Fluctuations in an Open Economy (2016)
Working Paper: Bond Finance, Bank Credit, and Aggregate Fluctuations in an Open Economy (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:85:y:2017:i:c:p:90-109

DOI: 10.1016/j.jmoneco.2016.10.009

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