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The Second Wave of Global Liquidity: Why Are Firms Acting Like Financial Intermediaries?

Julian Caballero, Ugo Panizza and Andrew Powell
Authors registered in the RePEc Author Service: Eduardo Lora ()

No 7638, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: Recent work suggests non-financial firms have acted like financial intermediaries particularly in emerging economies. This paper corroborates these findings but then asks "why?" The results indicate evidence for carry-trade activities, but they are focused on countries with higher levels of capital controls, particular controls on inflows. There is little evidence for such activities given other potential motives. It is posited that this phenomenon is due more to the reaction of countries in the face of low global interest rates, quantitative easing and strong capital inflows than incomplete markets or the retreat of global banks due to impaired balance sheets or tighter regulations.

Keywords: Capital Controls; Carry Trade; Financial Assets; Bonds; Financial Intermediaries; Interest rates; Capital inflow; Capital Markets; Global Financial Crisis; credit growth; Financial Risk; Financial Stability; financial intermediaries; foreign currency bond issuance; financial asset; interest rates (search for similar items in EconPapers)
JEL-codes: F33 F30 E51 (search for similar items in EconPapers)
Date: 2016-05
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Related works:
Working Paper: The second wave of global liquidity: Why are firms acting like financial intermediaries? (2015) Downloads
Working Paper: The second wave of global liquidity: Why are firms acting like financial intermediaries? (2015) Downloads
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