Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/146497
Authors: 
Caballero, Julián
Fernández, Andrés
Park, Jongho
Year of Publication: 
2016
Series/Report no.: 
IDB Working Paper Series IDB-WP-719
Abstract: 
This paper studies the influence of external financial factors on economic activity in emerging economies (EMEs) motivated by a considerable increase in foreign financing by the corporate sector in EMEs since the early 2000s, mainly in the form of bond issuance. A quarterly external financial indicator for several EMEs is built using bond-level data on spreads of corporate bonds issued in foreign capital markets, and its relationship with economic activity is examined. Results show that the indicator has considerable predictive power on future economic activity. Furthermore, an identified adverse shock to the financial indicator generates a large and protracted fall in real output growth, and about a third of its forecast error variance is associated with this shock. These findings are robust to controlling for possible spillovers from sovereign to corporate risk, among other considerations.
Subjects: 
Corporate bonds
Options adjusted spread
Economic activity
Emerging economies
JEL: 
E32
E37
F34
F37
G15
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by-nc-nd/3.0/igo/legalcode
Document Type: 
Working Paper

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