Do Corporate Bond Shocks Affect Commercial Bank Lending?

Author: Mr. Mario Catalan and Alexander W. Hoffmaister

Volume/Issue: Volume 2023 Issue 156

Publication date: August 2023

ISBN: 9798400251368

$20.00

Add to Cart by clicking price of the language and format you'd like to purchase

Available Languages and Formats


English

Prices in red indicate formats that are not yet available but are forthcoming.

Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Banks and Banking , Finance , Economics- Macroeconomics , Money and Monetary Policy , Economics / General , excess bond premium , banks , VAR models , financial markets and the macroeconomy , systemic risk , contagion , , corporate bond market shock , corporate bond market disruption , banking sector variable , commercial bank lending , corporate bond shock , Bank credit , Commercial banks , Corporate bonds , Securities markets , Bonds , Global

Also of interest

Measuring Soft Power: A New Global Index

WORKING PAPERS PUBLISHED IN FEBRUARY 2006

WORKING PAPERS PUBLISHED IN APRIL 2003

WORKING PAPERS PUBLISHED IN SEPTEMBER 2004

Summary

Understanding how corporate bond market disruptions are transmitted to the rest of the financial system is essential to gauge systemic financial risk and design policy responses. In this study, we extend the vector autoregression model of Gilchrist and Zakrajšek (2012) to explicitly account for the role of commercial banks in the transmission of corporate bond credit spread shocks. We find that corporate bond market shocks can reduce commercial bank lending activity by tightening loan supply. Policies designed to contain stress in the corporate bond market can thus mitigate systemic risk by limiting contagion to the commercial banking sector.