Capital Controls and the Cost of Debt

Eugenia Andreasen (), Martin Schindler and Patricio Valenzuela

IMF Economic Review, 2019, vol. 67, issue 2, No 2, 288-314

Abstract: Abstract Using a panel data set for international corporate bonds and capital account restrictions in advanced and emerging economies, we show that restrictions on capital inflows produce a substantial and economically meaningful increase in corporate bond spreads, with a one-standard-deviation increase in our capital controls index increasing spreads by up to 35 basis points. The effect of capital controls on inflows differs across firms and across countries; the effect is particularly strong for firms that face more restricted access to alternative sources of external financing. Our findings establish a novel channel through which capital controls affect economic outcomes.

Keywords: F3; F4; G1; G3 (search for similar items in EconPapers)
Date: 2019
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Related works:
Working Paper: Capital Controls and the Cost of Debt (2017)
Working Paper: Capital Controls and the Cost of Debt (2015)
Working Paper: Capital Controls and the Cost of Debt (2015)
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DOI: 10.1057/s41308-019-00080-6

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