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Do credit markets respond to macroeconomic shocks?

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Detalhes bibliográficos
Resumo:The response of corporate bond credit spreads to three exogenous macro-shocks -- oil supply, investment-specific technology, and government spending -- is large, significant, and a mirror image of macroeconomic activity. This counter-cyclicality is largely driven by credit risk premia and translates into significant return predictability. Equity risk premia exhibit similar responses, providing external validity. Information rigidities and leverage play a key role in the transmission of the shocks. Since causal evidence linking macro-shocks to credit markets is scarce and recent work highlights the real effects of credit fluctuations, our findings contribute to understanding the joint dynamics of credit markets and the macroeconomy.
Autores principais:Boons, Martijn
Outros Autores:Ottonello, Giorgio; Valkanov, Rossen
Assunto:Credit spreads Time-Varying Risk Premia Macroeconomic risk Shocks Return Predictability
Ano:2023
País:Portugal
Tipo de documento:artigo
Tipo de acesso:acesso aberto
Instituição associada:Universidade Nova de Lisboa
Idioma:inglês
Origem:Repositório Institucional da UNL

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