Sovereign debt and corporate borrowing costs in emerging markets

Ağca, Şenay; Celasun, Oya

doi:10.1016/j.jinteco.2012.02.009

Cited by 79 publications

(40 citation statements)

References 46 publications

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“…In comparison, the negative relationship between government debt as a percent of GDP and real GDP in this article are consistent with previous findings by Baldacci and Kumar (2010), Hauner and Kumar (2011), López, Riquelme and Muñoz (2011), Gruber and Kamin (2012, Ağca and Celasun (2012), Claeys, Moreno and Suriñach (2012) and Aisen and Hauner (2013) when government debt as a percent of GDP is greater than the critical value of 69.22%. But the results cannot be compared with previous findings when the debt-to-GDP ratio is less than the critical value of 69.22%, because they do not estimate a critical value of government debt as a percent of GDP.…”

Section: Discussionsupporting

confidence: 93%

“…The effect is smaller among OECD or EU countries due to global financial integration and larger in emerging countries due to less financial integration. Ağca and Celasun (2012) reveal that a rising external public debt leads to a higher corporate borrowing cost whereas a higher domestic public debt does not affect corporate borrowing cost in 15 emerging countries including Hungary, and that countries with past default incidents or frail creditor rights tend to have a higher correlation. Aisen and Hauner (2013) investigate the effect of government budget deficits on the interest rate using a sample of 60 advanced and emerging countries including Hungary during 1970-2006.…”

Section: Literature Reviewmentioning

confidence: 92%

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Test of a quadratic relationship between aggregate output and government debt in Hungary

Hui¹

2018

EurJ Appl Econ

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Abstract:The study which applies extended model of aggregate demand and aggregate supply (AD/AS) and uses a quarterly sample during the period from 2001 (Q1) till the last quarter of 2015, has shown that real GDP in Hungary exhibits a bell-shaped quadratic relationship with government debt as a percent of GDP (DY), direct relationship with the real effective exchange rate (ER), stock market price (SP) and the real crude oil price (OP), and an inverse relationship with the real government bond yield (IR) and the expected inflation rate (EI). The critical value of government debt as a percent of GDP is estimated to be 69.22%, which is higher than the EU criterion of 60.00% but less than the threshold of 90.00% proposed by Reinhart and Rogoff (2010).

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Section: Discussionsupporting

confidence: 93%

Section: Literature Reviewmentioning

confidence: 92%

Test of a quadratic relationship between aggregate output and government debt in Hungary

Hui¹

2018

EurJ Appl Econ

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“…A closely related phenomenon has been described by Caballero and Krishnamurthy (), who show that in times of financial stress public‐sector debt fully crowds out private‐sector debt from financial markets. Along similar lines, Ağca and Celasun () argue that a higher stock of sovereign debt increases the risk associated with lending to the private sector. This heightened risk drives up the cost of private external debt or lowers the willingness of external lenders to supply funds to the private sector, leading to what the authors call a ‘crowding out of private access’ to international markets.…”

Section: The Link Between Public and Private Debts – Theoretical Consmentioning

confidence: 87%

The Interplay Between Public and Private External Debt Stocks

Brzozowski

Siwińska-Gorzelak

2016

International Finance

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Using a sample of 48 emerging and developing countries in the 1970–2012 period, we investigated the interactions between the stock of sovereign debt and the quantity of corporate external borrowing. We found that public external debt hinders private‐sector access to external loan and bond markets. By contrast, the stock of private debt in international financial markets exerts a positive influence on public external debt from all sources except other private creditors. We also found the incidence of bank crises, capital account openness and the rate of economic growth to be among the macroeconomic variables that have a significant impact on both public and private external debts.

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“…Also Ağca and Celasun (2012) find the relation between external debt of a public sector and corporate borrowing costs. They argue that companies face significantly higher borrowing costs with higher level of sovereign debt; moreover, the relation is stronger for countries with weak creditor risks and episodes of sovereign defaults.…”

Section: Government Debt and Corporate Performancementioning

confidence: 97%

Sovereign Debt and Corporate Capital Structure: The Evidence From Selected European Countries During the Gglobal Financial and Economic Crisis

Mokhova¹,

Zinecker

2017

Business: Theory and Practice

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The recent Global financial crisis and the following European debt crisis show the significance of country financial stability and its impact on the private sector. Moreover, the sovereign debt as an essential element of government macroeconomic policy influences the financial performances of the companies and their future development and growth. The capital structure and financing decisions represent one of the most significant parts of company’s financial policy and its key to financial strength. There are a lot of external factors influencing the capital structure; however, due to the European debt crisis the aim of this study is to indicate the influence of sovereign debt on capital structure of the private held companies in different European countries. This study examines the evidence from European developed countries and emerging markets for the period 2005–2012, in order to compare the level of its impact on the capital structure according to the countries’ specifics. We find that after Global Financial Crisis the sovereign debt has tendency to increase in all investigated countries. Greece and Italy have the highest level of debt and it exceeds their Gross Domestic Product (GDP). In addition to that, the Czech Republic has the lowest level of sovereign debt to GDP, but at the same time the corporate capital structure exceeds 100%. The sovereign debt levels are strongly and statistically significantly correlated with each other, however, Hungarian debt has weaker relation with other countries. The findings also show the integration and interdependence of European countries. Moreover, Hungarian, Czech and German private sectors are the most depended on the level of sovereign debt.

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Sovereign debt and corporate borrowing costs in emerging markets

Cited by 79 publications

References 46 publications

Test of a quadratic relationship between aggregate output and government debt in Hungary

Test of a quadratic relationship between aggregate output and government debt in Hungary

The Interplay Between Public and Private External Debt Stocks

Sovereign Debt and Corporate Capital Structure: The Evidence From Selected European Countries During the Gglobal Financial and Economic Crisis

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