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The Growing Importance of the Economic Role of the Corporate Bond Market

Author

Listed:
  • Attila Becsi

    (Magyar Nemzeti Bank)

  • Gergely Bognar

    (Magyar Nemzeti Bank)

  • Mate Loga

    (Magyar Nemzeti Bank)

Abstract

The role of corporate bonds has expanded globally in the past decade, as they are an ideal financial instrument both for diversifying the liability structure of issuing companies and managing investors' portfolios. An adequately developed, liquid corporate bond market has a beneficial effect on the functioning and transparency of the market mechanisms of the economy and can also strengthen the crisis resilience of the financial system. Several studies have shown that - in addition to the normal functioning of companies - the issue of corporate financing is also important in crisis management, as uncertainty during a crisis has a negative impact on the liquidity of bank lending, limiting companies' funding options. In such a situation, it is therefore vital that companies can also rely on other forms of financing. Recognising this in the aftermath of the 2008-2009 economic crisis, central banks in a number of countries launched bond purchase programmes in order to start supporting the expansion of the corporate bond market. Thanks to the Bond Funding for Growth Scheme (BFGS) of the Magyar Nemzeti Bank (the Central Bank of Hungary, MNB), the Hungarian corporate bond market now offers a realistic financing alternative to bank loans for a wide range of companies.

Suggested Citation

  • Attila Becsi & Gergely Bognar & Mate Loga, 2021. "The Growing Importance of the Economic Role of the Corporate Bond Market," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 20(4), pages 5-37..
    • Handle: RePEc:mnb:finrev:v:20:y:2021:i:4:p:5-37.
    as

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    File URL: https://en-hitelintezetiszemle.mnb.hu/letoltes/fer-20-4-st1-becsi-bognar-loga.pdf
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    References listed on IDEAS

    as
    1. Mr. Pipat Luengnaruemitchai & Ms. Li L Ong, 2005. "An Anatomy of Corporate Bond Markets: Growing Pains and Knowledge Gains," IMF Working Papers 2005/152, International Monetary Fund.
    2. Boneva, Lena & de Roure, Calebe & Morley, Ben, 2018. "The impact of the Bank of England’s Corporate Bond Purchase Scheme on yield spreads," Bank of England working papers 719, Bank of England.
    3. Magdalena Gostkowska-Drzewicka, 2014. "Corporate Bond Market Of Real Estate Development Companies In Poland," "e-Finanse", University of Information Technology and Management, Institute of Financial Research and Analysis, vol. 10(1), pages 1-16, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    corporate bond market; asset purchase programme; economic and financial crisis; monetary policy;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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