How Does Public External Debt Affect Corporate Borrowing Costs In Emerging Markets?

December 1, 2009

Preview Citation

Format: Chicago

Oya Celasun, and Senay Agca. How Does Public External Debt Affect Corporate Borrowing Costs In Emerging Markets?, (USA: International Monetary Fund, 2009) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Emerging and frontier financial markets, External debt, Loans, Public debt, Syndicated loans

Keywords: Debt crisis, Loan yield, Private sector, Sovereign bond, WP

Publication Details

Pages:

36
Volume:

---
DOI:

---
Issue:

---
Series:

Working Paper No. 2009/266
Stock No:

WPIEA2009266
ISBN:

9781451874112
ISSN:

1018-5941

FACTSHEETS

RESOURCES

TOPICS

Flagship Publications

Other Publications

IMF reports and publications by country

Regional Offices

All News

See Also

For Journalists

Press Center

RESOURCES

FLAGSHIPS

KEY SERIES

IMF NOTES

IMF Working Papers