Surges and instability : the maturity shortening channel / Xiang Li, Dan Su
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Discovery
175147156X
URN
urn:nbn:de:gbv:3:2-134960
DOI
ISBN
ISSN
Beiträger
Körperschaft
Erschienen
Halle (Saale), Germany : Halle Institute for Economic Research (IWH) - Member of the Leibniz Association, [2021]
Umfang
1 Online-Ressource (III, 52 Seiten, A18) : Diagramme
Ausgabevermerk
This version: March 12, 2021
Sprache
eng
Anmerkungen
First draft: March 2020. This paper was previously titled as “Capital Inflow Surges and the Corporate Debt Maturity Structure”. For constructive suggestions and comments, we thank Estelle Cantillon, Nathan Converse, Clara Fernström, Linda Goldberg, Oliver Holtemöller, Catherine Koch, Boreum Kwak, Axel Lindner, Jakob Miethe, Carola Müller, Gernot Müller, Melina Papoutsii, Orkun Saka, Stefanie Schmit, Leslie Sheng Shen, Ruben Staffa, Saskia ter Ellen, Yannick Timmer, Gregor von Schweinitz, Changhua Yu, and other participants at the IWH research seminars, 2020 WEAI-IBEFA Summer Meeting, 2020 EEA Congress, 2020 WinE Retreat, and 2021 AFFECT Mentoring Event. Of course, all errors are our own
Inhaltliche Zusammenfassung
Capital inflow surges destabilise the economy through a maturity shortening mechanism. The underlying reason is that firms tend to make their debt redeemable on demand in order to accommodate the potential liquidity needs of global investors, which makes international borrowing endogenously fragile. Based on a theoretical model and empirical evidence at both firm level and macro level, our main findings are threefold. First, corporate debt maturity shortens substantially during surges, especially for firms with foreign bank relationships. Second, surges changethe shape of the interest rate term structure and lead to a more flattened yield curve. Third, the probability of a crisis following surges with a flattened yield curve is significantly larger than following surges without one. Our work suggests that debt maturity is key to understanding the consequences of capital inflow bonanzas.
Schriftenreihe
IWH-Diskussionspapiere ; 2020, no. 23 (November 2020) ppn:837399270