What Slice of the Pie? The Corporate Bond Market Boom in Emerging Economies

By Diana B Ayala Pena, Milan Nedeljkovic, Christian Saborowski

July 7, 2015

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Format: Chicago

Diana B Ayala Pena, Milan Nedeljkovic, and Christian Saborowski. What Slice of the Pie? The Corporate Bond Market Boom in Emerging Economies, (USA: International Monetary Fund, 2015) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper studies the determinants of shifts in debt composition among EM non-financial corporates. We show that institutions and macro fundamentals create an enabling environment for bond market development. During the recent boom episode, however, global cyclical factors accounted for most of the variation of bond shares in total corporate debt. The sensitivity to global factors appears to vary with relative bond market size—which we interpret to be associated with liquidity and easy entry and exit—rather than local fundamentals. Foreign bank linkages help explain why bond markets increasingly substituted for banks in channeling liquidity to EMs. Our results highlight the risk of capital flow reversal in EMs that benefited from the upturn in the global financial cycle mostly due to their liquid markets rather than strong fundamentals.

Subject: Bank credit, Banking, Bonds, Financial institutions, Financial markets, Loans, Money, Securities markets, Stocks

Keywords: Asia and Pacific, Bank credit, Bond market access, Bond market boom, Bond market development, Bond market market concentration, Bond markets, Bonds, Capital flows, Debt stock, Development benefit, Disadvantages bond market investor, Emerging Markets, Global, Global bond market boom, Loans, NFC debt, Securities markets, Stocks, WP

Publication Details

Pages:

45
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/148
Stock No:

WPIEA2015148
ISBN:

9781513579757
ISSN:

1018-5941

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