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Corporate Debt Structure and Economic Recoveries

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  • T. Grjebine
  • U. Szczerbowicz
  • F. Tripier

Abstract

This paper analyzes the business cycle behavior of the corporate debt structure and its interaction with economic recovery. The debt structure is measured as the share of bonds in the total credit to non-financial corporations for a quarterly panel of countries over the period 1989-2013. We first show that the substitution of loans for bonds in recoveries is a regular property of business cycles. Secondly, we provide evidence that economies with high bond share and important bond-loan substitution recover from the recessions faster. This identified link between corporate debt structure and business cycles is robust to the inclusion of traditional factors which shape recessions and recovery such as the size and the quality of financial markets, the occurrence of bank crisis, the dynamics of credit, and the distribution of firm size.

Suggested Citation

  • T. Grjebine & U. Szczerbowicz & F. Tripier, 2017. "Corporate Debt Structure and Economic Recoveries," Working papers 646, Banque de France.
  • Handle: RePEc:bfr:banfra:646
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    2. Iwata, Kazumasa & Jean, Sébastien & Kastrop, Christian & Loewald, Chris & Véron, Nicolas, 2018. "T20 resilience and inclusive growth," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 12, pages 1-10.
    3. Sam Langfield & Marco Pagano, 2016. "Bank bias in Europe: effects on systemic risk and growth," Economic Policy, CEPR;CES;MSH, vol. 31(85), pages 51-106.
    4. Thomas Drechsel, 2018. "Earnings-Based Borrowing Constraints and Macroeconomic Fluctuations," 2018 Papers pdr141, Job Market Papers.
    5. repec:bfr:rueban:2018:63 is not listed on IDEAS
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    7. Stépahne Lhuissier & Urszula Szczerbowicz, 2018. "Monetary Policy and Corporate Debt Structure," Working papers 697, Banque de France.

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    Keywords

    Corporate Debt; Bonds Markets; Banking; Business Cycles; Recovery; Financial Frictions.;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services

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