Bond vs. bank finance and the Great Recession

• Type: Article in International Scientific Journal
• Date: 2021

Authors

Manuel Mota Freitas Martins (Author) FEP; Verona, F (Author) Other

Journal

Title: Finance Research Letters

Vol. 39

ISSN: 1544-6123

Publisher: Elsevier

Indexing

ISI Web of Knowledge - 2 Citations

Scopus - 2 Citations

Other information

Authenticus ID: P-00S-6AX

DOI: 10.1016/j.frl.2020.101583

Abstract (EN): The typical increase of the corporate bond-to-bank ratio during downturns is known to mitigate business cycle recessions. In the three longest and deepest post-war U.S. recessions this ratio didn't increase from their outsets. In this paper we focus on the timing of the corporate bank-to-bond substitution in the Great Recession, simulating counterfactual paths for output growth under plausible notional behaviors of the bond-to-bank ratio. We find that the Great Recession would have been milder and the recovery much stronger if the bank-to-bond substitution had started since the outset of the recession and evolved thereafter as in most U.S. recessions.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 6