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The dynamic interrelation between external finance and bank credit

Lookup NU author(s): Dr Fabrizio Casalin

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Abstract

This paper studies the interrelation among the volumes of bonds andstocks issued by non-financial firms, and levels of industrial loans outstandingin the US. These aggregates are co-integrated and characterized by asymmetricvolatility. Their co-movements are driven by financial indicators suchas the yield spread, size of loan market and market volatility. Bond and stockissuance are positively correlated, and even more so during the expansionaryphase of the cycle. Loans outstanding and bond issuance are negatively correlated,and their substitutability increases in periods of economic downturn,highlighting the importance of bond markets to mitigate credit crunches.

Publication metadata

Author(s): Casalin F, Dia E

Publication type: Article

Publication status: Published

Journal: Applied Economics

Year: 2015

Volume: 48

Issue: 3

Pages: 243-259

Online publication date: 26/08/2015

Acceptance date: 28/07/2015

Date deposited: 02/08/2015

ISSN (print): 0003-6846

ISSN (electronic): 1466-4283

Publisher: Taylor & Francis

URL: http://dx.doi.org/10.1080/00036846.2015.1078442

DOI: 10.1080/00036846.2015.1078442

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