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Corporate Overseas Debt Issuance in the Context of Global Liquidity Transmission

Author

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  • Huang, Anni
  • Kishor, N. Kundan

Abstract

Given the rising importance of non-financial corporate overseas debt issuance in the overall international capital flow activities, this paper tries to understand the determinants of corporate overseas bond issuance in 32 countries during the sample period 1993-2015. The results suggest that the compression in risk premium in advanced economies has encouraged the corporates in emerging markets to borrow more from international bond markets. This effect is more prevalent in countries where policy makers impose tighter international capital control, so that corporates outside financial regulation serve as surrogate financial intermediaries at the border. Besides, corporates hold short-term assets in domestic currency as collateral for outstanding overseas debt, in expecting domestic currency appreciation, a behavior often phased as price arbitrage or carry trade position. Our results suggest a potential systematic shift in international financial risk transmission through corporate fixed-income markets and a possible external shock transmission channeled through the monetary policy spillover effect.

Suggested Citation

  • Huang, Anni & Kishor, N. Kundan, 2017. "Corporate Overseas Debt Issuance in the Context of Global Liquidity Transmission," MPRA Paper 83476, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:83476
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    File URL: https://mpra.ub.uni-muenchen.de/83476/1/MPRA_paper_83476.pdf
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    References listed on IDEAS

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    1. Hansen, Bruce E., 1999. "Threshold effects in non-dynamic panels: Estimation, testing, and inference," Journal of Econometrics, Elsevier, vol. 93(2), pages 345-368, December.
    2. Stephanie Lo & Kenneth Rogoff, 2015. "Secular stagnation, debt overhang and other rationales for sluggish growth, six years on," BIS Working Papers 482, Bank for International Settlements.
    3. Carmen M. Reinhart & Kenneth S. Rogoff, 2015. "Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 2(4), pages 5-17, June.
    4. Philip Turner, 2014. "The global long-term interest rate, financial risks and policy choices in EMEs," BIS Working Papers 441, Bank for International Settlements.
    5. Maurice Obstfeld, 2015. "Trilemmas and Tradeoffs: Living with Financial Globalization," Central Banking, Analysis, and Economic Policies Book Series,in: Claudio Raddatz & Diego Saravia & Jaume Ventura (ed.), Global Liquidity, Spillovers to Emerging Markets and Policy Responses, edition 1, volume 20, chapter 2, pages 013-078 Central Bank of Chile.
    6. Michael Chui & Ingo Fender & Vladyslav Sushko, 2014. "Risks related to EME corporate balance sheets: the role of leverage and currency mismatch," BIS Quarterly Review, Bank for International Settlements, September.
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    8. repec:oup:rfinst:v:30:y:2017:i:3:p:703-749. is not listed on IDEAS
    9. Valentina Bruno & Hyun Song Shin, 2017. "Global Dollar Credit and Carry Trades: A Firm-Level Analysis," Review of Financial Studies, Society for Financial Studies, vol. 30(3), pages 703-749.
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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Corporate Overseas Debt; Global Liquidity; Carry Trade Hypothesis; Monetary Policy Spillover;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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