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

Roberto Chang (), Andrés Fernández and Adam Gulan ()

No 22/2016, Research Discussion Papers from Bank of Finland

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.

JEL-codes: E32 E44 F41 G31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn and nep-mac
Date: 2016-08-05
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Published in Published in Journal of Monetary Economics, Volume 85, 1 January 2017: 90-109

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Related works:
Journal Article: Bond finance, bank credit, and aggregate fluctuations in an open economy (2017) Downloads
Working Paper: Bond Finance, Bank Credit, and Aggregate Fluctuations in an Open Economy (2016) Downloads
Working Paper: Bond Finance, Bank Credit, and Aggregate Fluctuations in an Open Economy (2016) Downloads
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