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Capital Controls and the Cost of Debt

Eugenia Andreasen (), Martin Schindler and Patricio Valenzuela

Working Papers from University of Pennsylvania, Wharton School, Weiss Center

Abstract: Using a novel panel data set for international corporate bonds and capital account restrictions in advanced and emerging economies, we find that restrictions on capital inflows produce a substantial and economically meaningful increase in corporate bond spreads. By contrast, we find no robust significant effect of restrictions on outflows. The effect of capital account restrictions on inflows is particularly strong for bonds maturing in the short-term, issued by small firms and in countries with underdeveloped financial markets. Additionally, the paper shows that capital account restrictions on inflows have a greater effect during periods of financial distress than during periods of financial stability. These results are suggestive of a causal interpretation of the estimated effects and establish a novel channel through which capital controls affect economic outcomes.

JEL-codes: F30 F40 G10 G30 (search for similar items in EconPapers)
Date: 2015-01
New Economics Papers: this item is included in nep-acc, nep-cfn, nep-ger, nep-ifn and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Capital Controls and the Cost of Debt (2019) Downloads
Working Paper: Capital Controls and the Cost of Debt (2017) Downloads
Working Paper: Capital Controls and the Cost of Debt (2015) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:upafin:15-02

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