How Does Public External Debt Affect Corporate Borrowing Costs In Emerging Markets
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How Does Public External Debt Affect Corporate Borrowing Costs In Emerging Markets
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Author : Oya Celasun
language : en
Publisher: International Monetary Fund
Release Date : 2009-12-01
How Does Public External Debt Affect Corporate Borrowing Costs In Emerging Markets written by Oya Celasun and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009-12-01 with Business & Economics categories.
Using data on syndicated loan issuances by emerging market firms, we find that an increase in the external debt of emerging market governments significantly raises the borrowing costs of the domestic corporate sector. This finding suggests that a higher level of public external debt "crowds out" foreign credit to the private sector by increasing the risk of a sovereign debt crisis and thereby making exposure to corporate sector debt less desirable. The effect is stronger in countries with weak creditor rights. The results highlight the potential costs of fiscal expansions for the domestic corporate sector even when debt is issued in foreign markets.
Emerging Market Corporate Leverage And Global Financial Conditions
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Author : Adrian Alter
language : en
Publisher: International Monetary Fund
Release Date : 2016-12-15
Emerging Market Corporate Leverage And Global Financial Conditions written by Adrian Alter and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-12-15 with Business & Economics categories.
Corporate debt in emerging markets has risen significantly in recent years amid accommodative global financial conditions. This paper studies the relationship of leverage growth in emerging market (EM) firms to U.S. monetary conditions, and more broadly, to global financial conditions. We find that accommodative U.S. monetary conditions are reliably associated with faster EM leverage growth during the past decade. Specifically, a 1 percentage point decline in the U.S. policy rate corresponds to an appreciable increase in EM leverage growth of 9 basis points, on average (relative to the sample average leverage growth of 35 basis points per year). This impact is more pronounced for sectors dependent on external financing, for SMEs, and for firms in more financially open EMs with less flexible exchange rates. The findings suggest that global financial conditions affect EM firms’ leverage growth in part by influencing domestic interest rates and by relaxing corporate borrowing constraints.
Determinants Of Investment Grade Status In Emerging Markets
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Author : Laura Jaramillo
language : en
Publisher: International Monetary Fund
Release Date : 2010-05-01
Determinants Of Investment Grade Status In Emerging Markets written by Laura Jaramillo and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-05-01 with Business & Economics categories.
Emerging market countries seek investment grade status to lower financing costs for the sovereign, expand the pool of potential investors to institutional investors, and allow corporates the possibility of reducing their borrowing costs. Using a random effects binomial logit model on a sample of 48 emerging markets, the paper finds that, to a large extent, investment grade rating assignments can be explained by a handful of variables. The results also suggest that efforts by emerging markets to increase the likelihood of an upgrade should focus on debt indicators rather than the other key determinants of investment grade status.
Stress Testing Corporate Balance Sheets In Emerging Economies
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Author : Mr.Julian T. S. Chow
language : en
Publisher: International Monetary Fund
Release Date : 2015-09-30
Stress Testing Corporate Balance Sheets In Emerging Economies written by Mr.Julian T. S. Chow and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-09-30 with Business & Economics categories.
In recent years, firms in emerging market countries have increased borrowing, particularly in foreign currency, owing to easy access to global capital markets, prolonged low interest rates and good investment opportunities. This paper discusses the trends in emerging market corporate debt and leverage, and illustrates how those firms are vulnerable to interest rate, exchange rate and earnings shocks. The results of a stress test show that while corporate sector risk remains moderate in most emerging economies, a combination of macroeconomic and financial shocks could significantly erode firms’ ability to service debt and lead to higher debt at risk, especially in countries with high shares of foreign currency debt and low natural hedges.
Global Waves Of Debt
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Author : M. Ayhan Kose
language : en
Publisher: World Bank Publications
Release Date : 2021-03-03
Global Waves Of Debt written by M. Ayhan Kose and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-03-03 with Business & Economics categories.
The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.
Would Collective Action Clauses Raise Borrowing Costs
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Author : Barry Eichengreen
language : en
Publisher: World Bank Publications
Release Date : 2000
Would Collective Action Clauses Raise Borrowing Costs written by Barry Eichengreen and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000 with Bonds categories.
Abstract: June 2000 - Collective action clauses raise borrowing costs for low-rated borrowers and lower them for high-rated borrowers. This result holds for all developing country bonds and also for the subset of sovereign bond issuers. It is easy to say that the International Monetary Fund should not resort to financial rescue for countries in crisis; this is hard to do when there is no alternative. That is where collective action clauses come in. Collective action clauses are designed to facilitate debt restructuring by the principals - borrowers and lenders - with minimal intervention by international financial institutions. Despite much discussion of this option, there has been little action. Issuers of bonds fear that collective action clauses would raise borrowing costs. Eichengreen and Mody update earlier findings about the impact of collective action clauses on borrowing costs. It has been argued that only in the past year or so have investors focused on the presence of these provisions and that, given the international financial institutions' newfound resolve to bail in investors, they now regard these clauses with trepidation. Extending their data to 1999, Eichengreen and Mody find no evidence of such changes but rather the same pattern as before: Collective action clauses raise the costs of borrowing for low-rated issuers but reduce them for issuers with good credit ratings. Their results hold both for the full set of bonds and for bonds issued only by sovereigns. They argue that these results should reassure those who regard collective action clauses as an important element in the campaign to strengthen international financial architecture. This paper - a product of the Development Prospects Group - is part of a larger effort in the group to analyze international capital flows. The study was funded by the Bank's Research Support Budget under the research project Pricing of Bonds and Bank Loans in the Market for Developing Country Debt. The authors may be contacted at eichengr@@econ.berkeley.edu or amody@@worldbank.org.
The Long Run Impact Of Sovereign Yields On Corporate Yields In Emerging Markets
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Author : Delong Li
language : en
Publisher: International Monetary Fund
Release Date : 2021-06-04
The Long Run Impact Of Sovereign Yields On Corporate Yields In Emerging Markets written by Delong Li and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-06-04 with Business & Economics categories.
We analyze the long-run impact of emerging-market sovereign bond yields on corporate bond yields, finding that the average pass-through is around one. The pass-through is larger in countries with greater sovereign risks and where sovereign bonds are more liquid. It is also greater for corporate bonds with lower ratings, shorter maturities, and for those issued by financial companies and government-related firms. Our results support theoretical arguments that corporate and sovereign yields are linked together through credit risks and liquidity premiums. Consequently, high sovereign risks may slowdown growth by persistently increasing private sector borrowing costs.
Sovereign Credit Ratings And Spreads In Emerging Markets
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Author : Laura Jaramillo
language : en
Publisher: International Monetary Fund
Release Date : 2011-03-01
Sovereign Credit Ratings And Spreads In Emerging Markets written by Laura Jaramillo and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-03-01 with Business & Economics categories.
Sovereign investment grade status is often associated with lower spreads in international markets. Using a panel framework for 35 emerging markets between 1997 and 2010, thispaper finds that investment grade status reduces spreads by 36 percent, above and beyond what is implied by macroeconomic fundamentals. This compares to a 5-10 percent reduction in spreads following upgrades within the investment grade asset class, and no impact formovements within the speculative grade asset class, ceteris paribus. While global financial conditions play a central role in determining spreads, market sentiment improves with lower external public debt to GDP levels and higher domestic growth rates.
The Impact Of Debt Sustainability And The Level Of Debt On Emerging Markets Spreads
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Author : Nazim Belhocine
language : en
Publisher: International Monetary Fund
Release Date : 2013-05-01
The Impact Of Debt Sustainability And The Level Of Debt On Emerging Markets Spreads written by Nazim Belhocine and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-05-01 with Business & Economics categories.
How do financial markets respond to concerns over debt sustainability and the level of public debt in emerging markets? We introduce a measure of debt sustainability – the difference between the debt stabilizing primary balance and the primary balance–in an otherwise standard spread regression model applied to a panel of 26 emerging market economies. We find that debt sustainability is an important determinant of spreads. In addition, using a panel smooth transition regression model, we find that the sensitivity of spreads to debt sustainability doubles as public debt increases above 45 percent of GDP. These results suggest that market interest rates react more to debt sustainability concerns in a country with a high level of debt compared to a country with a low level of debt.
World Economic Outlook September 2003
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Author : International Monetary Fund. Research Dept.
language : en
Publisher: International Monetary Fund
Release Date : 2003-04-10
World Economic Outlook September 2003 written by International Monetary Fund. Research Dept. and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003-04-10 with Business & Economics categories.
The World Economic Outlook, published twice a year in English, French, Spanish, and Arabic, presents IMF staff economists' analyses of global economic developments during the near and medium term. Chapters give an overview of the world economy; consider issues affecting industrial countries, and economics in transition to market; and address topics of pressing current interest. Annexes, boxes, charts, and an extensive statistical appendix augment the text.