Capital Controls and the Cost of Debt

By Eugenia Andreasen, Martin Schindler, Patricio A Valenzuela

June 9, 2017

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Format: Chicago

Eugenia Andreasen, Martin Schindler, and Patricio A Valenzuela. Capital Controls and the Cost of Debt, (USA: International Monetary Fund, 2017) accessed September 19, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Using a panel data set for international corporate bonds and capital account restrictions in advanced and emerging economies, we show that restrictions on capital inflows produce a substantial and economically meaningful increase in corporate bond spreads. A number of heterogeneities suggest that the effect of capital controls on inflows is particularly strong for more financially constrained firms, establishing a novel channel through which capital controls affect economic outcomes. By contrast, we do not find a robust significant effect of restrictions on outflows.

Subject: Balance of payments, Bonds, Capital account, Capital controls, Corporate bonds, Financial institutions, Financial services, Yield curve

Keywords: Bond, Bond market market capitalization, Bonds, Capital account, Capital account, Capital account restriction, Capital controls, Control, Corporate bonds, Debt capital, Firm, Global, Market illiquidity, Operating income, Risk diversification, Short-term debt, WP, Yield curve

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/135
Stock No:

WPIEA2017135
ISBN:

9781484303313
ISSN:

1018-5941

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