Monetary policy and corporate bond yield spreads

Beckworth, David; Moon, Kenneth P.; Toles, J. Holland

doi:10.1080/00036840902845368

Cited by 14 publications

(9 citation statements)

References 16 publications

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“…Alessandrini (1999), Huang and Chen (2007) found that monetary policy is an important determinant of corporate bond yield spreads [18][19]. Beckworth, Moon, Toles (2010) with long-term currency neutral conditions vector autoregression method to verify the impact of monetary policy on corporate bond yield spread default risk, liquidity risk and risk aversion affected.…”

Section: A Macroeconomic Factors 1) Gdp Growth (Gdp) and The Purchasmentioning

confidence: 99%

Theoretical basis on Determinants of Corporate Bond Spreads

Huang¹

2016

Advances in Computer Science Research

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This paper analyzes the theoretical basis of the relevant papers. First, the meaning and connotation of corporate bond yield spreads to define the difference between corporate bonds and corporate bonds; secondly, analyzed the determinants of corporate bond yield spreads, including: macroeconomic factors, capital market factors, individual factors of corporate bonds; and then introduces research methods of corporate bond yield spreads, including GARCH and ARCH methods, time series analysis, panel data fixed effects model, state space model and Kalman filter method.

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Section: A Macroeconomic Factors 1) Gdp Growth (Gdp) and The Purchasmentioning

confidence: 99%

Theoretical basis on Determinants of Corporate Bond Spreads

Huang¹

2016

Advances in Computer Science Research

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“…3 While the literature for the Euro Area is quite thin, Wright (2012), Beckworth, Moon, and Toles (2010), and Cenesizoglu and Essid (2012) show for the US that corporate bond yield spreads react significantly to monetary policy shocks. Javadi, Nejadmalayeri, and Krehbiel (2017) provide evidence that the effect of the systematic component of monetary policy may lead to higher market uncertainty in crisis times and to an adverse response of corporate credit spreads.…”

Section: Introductionmentioning

confidence: 99%

The Short-Run Effect of Monetary Policy Shocks on Credit Risk: An Analysis of the Euro Area

Kim¹,

Other

2019

SSRN Journal

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We examine the credit channel of monetary policy from 2000 to 2015 in the Euro Area using daily monetary policy shock and credit risk measures in an autoregressive distributed lag model. We find that an expansionary monetary policy shock leads to a short-run increase in the credit risk of non-financial corporations. This dysfunctionality of the credit channel is driven by the crisis-dominated post-2009 period. During this period, market participants may have interpreted expansionary monetary policy shocks as a signal of worsening economic prospects. We further distinguish policy shocks aiming at short-and long-run expectations of market participants, i.e. target and path shocks. The adverse effect disappears for crisis countries when the European Central Bank targets long-run rather than short-run expectations.

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“…King, Levin, and Perli (2007) find that their corporate credit spreads index contains important information to predict a recession [6] . Beckworth (2010) argues that monetary policy can affect the default risk 2013 International Conference on Management Science & Engineering (20 th ) July 17-19, 2013 Harbin, P.R.China and liquidity compensation of corporate bonds, and the degree of investors' risk aversion [7] . Nyberg (2010) tests a dynamic autoregressive probability model to explain the recessions in the United States and Germany.…”

Section: Introductionmentioning

confidence: 99%

Forecasting macro-economy based on the term structure of credit spreads: Evidence from China

Zhou

Wang

Tong

2013

2013 International Conference on Management Science and Engineering 20th Annual Conference Proceedings

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This paper establishes an original methodology to forecast macro-economy based on the term structure of credit spreads. It combines the traditional Svensson model with genetic algorithms to obtain the interest rate term structures of government bonds and corporate bonds, and calculates credit spreads as their differences. The principal component analysis is used to derive three factors of the term structure of credit spreads: level, slope and curvature. Based on these three factors and several macroeconomic variables including the consumer price index, exchange rate, and the growth rate of industrial and broad money, VAR models are developed and tested to forecast macroeconomic variables. Based on monthly transaction data from Shanghai Stock Exchange in China covering the period from are taken as out-of-sample data to test the models' robustness by comparing the estimates of the forecasting model with the actual values. The empirical results confirm that our VAR models can predict the changes of China's macro-economy well, which indicates that the term structure of credit spreads contains information of future changes of macroeconomic variables. We believe this result has significant implications for macro-economy policy-makers.

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Monetary policy and corporate bond yield spreads

Cited by 14 publications

References 16 publications

Theoretical basis on Determinants of Corporate Bond Spreads

Theoretical basis on Determinants of Corporate Bond Spreads

The Short-Run Effect of Monetary Policy Shocks on Credit Risk: An Analysis of the Euro Area

Forecasting macro-economy based on the term structure of credit spreads: Evidence from China

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