Corporate Overseas Debt Issuance in the Context of Global Liquidity Transmission

Huang, Anni and Kishor, N. Kundan (2017): Corporate Overseas Debt Issuance in the Context of Global Liquidity Transmission.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Corporate Overseas Debt, Global Liquidity, Carry Trade Hypothesis, Monetary Policy Spillover
• Subjects: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy; F - International Economics > F3 - International Finance > F31 - Foreign Exchange; F - International Economics > F3 - International Finance > F32 - Current Account Adjustment ; Short-Term Capital Movements; F - International Economics > F3 - International Finance > F34 - International Lending and Debt Problems; F - International Economics > F3 - International Finance > F36 - Financial Aspects of Economic Integration; F - International Economics > F6 - Economic Impacts of Globalization > F65 - Finance; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets

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