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

How Does Public External Debt Affect Corporate Borrowing Costs in Emerging Markets? by Oya Celasun
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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.
International Monetary Fund; December 2009
36 pages; ISBN 9781452791425
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Title: How Does Public External Debt Affect Corporate Borrowing Costs in Emerging Markets?
Author: Oya Celasun; Senay Agca
 
ISBNs
1452791422
9781451874112
9781451918274
9781452791425