Capital inflows, sovereign debt and bank lending: Micro-evidence from an emerging market
This paper uses a natural experiment to show that government access to foreign credit increases private access to credit. I identify a sudden, and unanticipated increase in capital inflows to the sovereign debt market in Colombia, due to a rebalancing in a government bond index by J.P. Morgan. I fin...
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| Format: | Article |
| Language: | English |
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Oxford University Press
2018
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| Online Access: | View Fulltext in Publisher |
| Summary: | This paper uses a natural experiment to show that government access to foreign credit increases private access to credit. I identify a sudden, and unanticipated increase in capital inflows to the sovereign debt market in Colombia, due to a rebalancing in a government bond index by J.P. Morgan. I find that market makers banks in the treasury market reduced their sovereign debt by 7.8 percentage points of assets and increased their credit availability by 4.2 percentage points of assets. Using industry level data, I show that a higher exposure to market makers led to a higher growth in economic activity. © The Author(s) 2018. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. |
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| ISBN: | 08939454 (ISSN) |
| DOI: | 10.1093/rfs/hhy026 |