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- Title
Capital Controls and the Cost of Debt.
- Authors
Andreasen, Eugenia; Schindler, Martin; Valenzuela, Patricio
- Abstract
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, with a one-standard-deviation increase in our capital controls index increasing spreads by up to 35 basis points. The effect of capital controls on inflows differs across firms and across countries; the effect is particularly strong for firms that face more restricted access to alternative sources of external financing. Our findings establish a novel channel through which capital controls affect economic outcomes.
- Subjects
DEBT management; CORPORATE bonds; CAPITAL movements; INTERNATIONAL business enterprises; INVESTMENT laws; EMERGING markets; RISK-return relationships
- Publication
IMF Economic Review, 2019, Vol 67, Issue 2, p288
- ISSN
2041-4161
- Publication type
Article
- DOI
10.1057/s41308-019-00080-6