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Bond Financing Conditions, Economic Activity and the Financial Accelerator

Author

Listed:
  • Eduardo Maqui
  • Márcia Silva-Pereira
  • Nicholas Vause

Abstract

This paper studies how bond financing conditions affect economic activity in the United Kingdom, both in aggregate and across firms. At the aggregate level, we show that our proxy for bond financing conditions – the excess bond premium (EBP) – outperforms traditional business cycle indicators in predicting macroeconomic outcomes. EBP shocks have economically significant effects, with investment – especially in capitalintensive assets and industries – being more strongly affected. At the firm level, we show that highly leveraged and bond-reliant firms are particularly exposed to such shocks to market-based credit conditions, providing novel evidence on the financial accelerator.

Suggested Citation

  • Eduardo Maqui & Márcia Silva-Pereira & Nicholas Vause, 2025. "Bond Financing Conditions, Economic Activity and the Financial Accelerator," Working Papers w202518, Banco de Portugal, Economics and Research Department.
    • Handle: RePEc:ptu:wpaper:w202518
    as

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    File URL: https://www.bportugal.pt/sites/default/files/documents/2025-12/WP202518.pdf
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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