Bond Finance, Bank Credit, and Aggregate Fluctuations in an Open Economy

Roberto Chang, Andrés Fernández Martin and Adam Gulan

No 7805, IDB Publications (Working Papers) from Inter-American Development Bank

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, this paper develops 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.

Keywords: capital goods; interest rates; bond finance (search for similar items in EconPapers)
JEL-codes: E32 E44 F41 G31 (search for similar items in EconPapers)
Date: 2016-08
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Bond finance, bank credit, and aggregate fluctuations in an open economy (2017)
Working Paper: Bond Finance, Bank Credit, and Aggregate Fluctuations in an Open Economy (2016)
Working Paper: Bond finance, bank credit, and aggregate fluctuations in an open economy (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:7805

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