Emerging Market Corporate Leverage and Global Financial Conditions
IMF Working Papers, December 15, 2016
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- Emerging Market Corporate Leverage and Global Financial Conditions
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Bibliographic details
- Authors: Adrian Alter, Selim A Elekdag
- Published: December 15, 2016
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475560480.001
Summary
- Corporate debt in emerging markets has risen significantly in recent years amid accommodative global financial conditions.
- The paper studies the relationship of leverage growth in emerging market (EM) firms to U.S. monetary conditions, and more broadly, to global financial conditions.
- Accommodative U.S. monetary conditions are reliably associated with faster EM leverage growth during the past decade.
Key empirical findings
- 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).
- The impact of accommodative U.S. monetary conditions on leverage growth is more pronounced for:
- Sectors dependent on external financing.
- Small and medium enterprises (SMEs).
- Firms in more financially open EMs with less flexible exchange rates.
Mechanisms identified
- Global financial conditions affect EM firms’ leverage growth in part by:
- Influencing domestic interest rates.
- Relaxing corporate borrowing constraints.
Scope and metadata
- Subject: Balance of payments, Capital account, Central bank policy rate, Exchange rate arrangements, Exchange rate flexibility, Financial markets, Financial sector development, Financial services, Foreign exchange, Small and medium enterprises
- Keywords: asset tangibility, assets ratio, Capital account, Central bank policy rate, Corporate structure, exchange rate, Exchange rate arrangements, Exchange rate flexibility, external finance, Financial sector development, Global, Global financial conditions, individuals EMs, Leverage, leverage growth, leverage ratio, monetary policy stance, shadow rate, U.S. monetary policy, WP
- Pages: 49
- Volume: 2016
- Issue: 243
- Series: Working Paper No. 2016/243
- DOI: https://doi.org/10.5089/9781475560480.001
- ISBN: 9781475560480
- ISSN: 1018-5941
By Adrian Alter and Selim A Elekdag; December 15, 2016. This Working Paper should not be reported as representing the views of the IMF. The views expressed are those of the author(s) and do not necessarily represent those of the IMF or IMF policy.
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- Emerging Market Corporate Leverage and Global Financial Conditions