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Cost of Borrowing, Institutional Quality, and Capital Openness

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  • Gabriel Martinez

    (Department of Economics, Ave Maria University)

Abstract

Does improving institutional quality lower borrowing costs or raise them? Better institutions the marginal productivity of capital, the demand for funds and the interest rate. They may also lending risks, raising the supply of funds and lowering the cost of capital. Using data from 100 this paper shows that the impact of institutional quality on borrowing costs depends on whether country has favored improving financial institutions, which is proxied by its openness to capital flows, controlling for a host of factors. These results are robust to changes in definitions and specification.

Suggested Citation

  • Gabriel Martinez, 2010. "Cost of Borrowing, Institutional Quality, and Capital Openness," Working Papers 1001, Ave Maria University, Department of Economics.
    • Handle: RePEc:avm:wpaper:1001
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    File URL: http://mysite.avemaria.edu/RePEc/working-papers/WP1001-Martinez-Cost-of-Borrowing.pdf
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    References listed on IDEAS

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    Cited by:

    1. Gene Johnson & Tam Vu & Eric Im, 2016. "International Accounting Standards and Foreign Direct Investment," Quarterly Journal of Business Studies, Research Academy of Social Sciences, vol. 2(3), pages 143-150.

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    More about this item

    Keywords

    interest rates; institutional quality;

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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