Foreign capital flows, credit spreads, and the business cycle

Ding Du, Wade Rousse

Research output: Contribution to journalArticle

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 languageEnglish (US)
JournalJournal of International Financial Markets, Institutions and Money
DOIs
StateAccepted/In press - Jan 1 2018
Externally publishedYes

Fingerprint

Capital flows
Business cycles
Foreign capital
Credit spreads
Treasury bonds
Long-term interest rates
Corporate bonds
Financing
Economic activity
Interest rates
Global financial crisis
Bond market

Keywords

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

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

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