Foreign capital flows, credit spreads, and the business cycle

Ding Du; Wade Rousse

doi:10.1016/j.intfin.2018.06.001

Foreign capital flows, credit spreads, and the business cycle

Ding Du, Wade Rousse

Business, The W.A. Franke College of (CoB)

Research output: Contribution to journal › Article › peer-review

4 Scopus citations

Abstract

Previous studies have found that foreign capital flows into the US Treasury and corporate-bond markets drive US long-term interest rates. In this paper, we extend the literature by showing that (1) foreign capital flows also drive the US risk structure of interest rates (i.e., credit spreads), and (2) the impacts of foreign capital flows through the credit spread on corporate financing and investment as well as aggregate economic activities are significant, even outside of the Global Financial Crisis period.

Original language	English (US)
Pages (from-to)	59-79
Number of pages	21
Journal	Journal of International Financial Markets, Institutions and Money
Volume	57
DOIs	https://doi.org/10.1016/j.intfin.2018.06.001
State	Published - Nov 2018

Keywords

Corporate financing and investment
Credit spreads
Foreign capital flows
Global banking glut
Global savings glut

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1016/j.intfin.2018.06.001

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AB - Previous studies have found that foreign capital flows into the US Treasury and corporate-bond markets drive US long-term interest rates. In this paper, we extend the literature by showing that (1) foreign capital flows also drive the US risk structure of interest rates (i.e., credit spreads), and (2) the impacts of foreign capital flows through the credit spread on corporate financing and investment as well as aggregate economic activities are significant, even outside of the Global Financial Crisis period.

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KW - Credit spreads

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KW - Global banking glut

KW - Global savings glut

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Foreign capital flows, credit spreads, and the business cycle

Abstract

Keywords

ASJC Scopus subject areas

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