Risk Taking and Interest Rates: Evidence from Decades in the Global Syndicated Loan Market

IMF Working Papers, January 27, 2017

Source details

Canonical URL

Risk Taking and Interest Rates: Evidence from Decades in the Global Syndicated Loan Market

Other formats

• Markdown version
• Structured JSON version
• Bundle manifest

Bibliographic details

• Authors: Seung Jung Lee, Lucy Qian Liu, Viktors Stebunovs
• Published: January 27, 2017
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781475572377.001

Research question and scope

• Investigates how low interest rates in the United States affect risk taking in the market of crossborder leveraged corporate loans.
• Examines cross-border spillover effects of monetary policy to the extent that actions of the Federal Reserve affect U.S. interest rates.
• Focus: global syndicated loan market, EME borrower evidence, U.S. dollar term loans.

Key findings

• Before the crisis:
  • Lenders made ex-ante riskier loans to non- U.S. borrowers in response to a decline in short-term U.S. interest rates.
• After the crisis:
  • Lenders made ex-ante riskier loans to non- U.S. borrowers in response to a decline in longer-term U.S. interest rates.
• Economic uncertainty and risk appetite:
  • Appear to play a limited role in explaining ex-ante credit risk.
• Policy implication:
  • Results highlight the potential policy challenges faced by central banks in affecting credit risk cycles in their own jurisdictions due to international spillovers.

Subjects and keywords

• Subjects: Credit risk, Financial institutions, Financial regulation and supervision, Financial services, Loans, Market risk, Short term interest rates, Syndicated loans
• Keywords: Credit risk, EME borrower, federal funds rate, Global, international spillovers, loan spread, Loans, Market risk, monetary policy, risk taking, Short term interest rates, Syndicated loans, term loan, U.S. dollar, WP

Publication and metadata

• Authors: Seung Jung Lee, Lucy Qian Liu, Viktors Stebunovs
• Date: January 27, 2017
• Pages: 47
• Volume: 2017
• Issue: 016
• Series: Working Paper No. 2017/016
• DOI: https://doi.org/10.5089/9781475572377.001
• Stock No: WPIEA2017016
• ISBN: 9781475572377
• ISSN: 1018-5941

IMF Working Papers. Risk Taking and Interest Rates: Evidence from Decades in the Global Syndicated Loan Market (January 27, 2017).

Content in this bundle

• Risk Taking and Interest Rates: Evidence from Decades in the Global Syndicated Loan Market
  • Risk Taking and Interest Rates: Evidence from Decades in the Global Syndicated Loan Market (Markdown version)
  • Risk Taking and Interest Rates: Evidence from Decades in the Global Syndicated Loan Market (PDF)