Macroeconomic Determinants of Corporate Credit Spreads: Evidence from Canada
Nusrat Jahan ()
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Nusrat Jahan: Department of Economics, Carleton Univeristy, https://scholar.google.com/citations?user=Hs_dotsAAAAJ&hl=en
No 22-07, Carleton Economic Papers from Carleton University, Department of Economics
How important are macroeconomic factors relative to financial factors in explaining the variation in corporate credit spreads in the Canadian bond market? The answer to this question is of great significance in managing the risk associated with fixed-income securities and also in preventing the negative consequences that widening of spread has on real activity. I find that although the macroeconomic determinants both in their levels and volatilities have significant effects on credit spread, their contribution in explaining the variations in spreads is actually quite small. Much of the variation in spreads are attributed to the unobserved bond-specific heterogeneity, which reaffirms the existence of a - credit spread puzzle. Classification
Pages: 36 pages
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Published: Carleton Economics Working Papers
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