Bermpei, Theodora and Karadimitropoulou, Aikaterini and Triantafyllou, Athanasios and Alshalahi, Jebreel (2023) Does commodity price uncertainty matter for the cost of credit? Evidence from developing and advanced economies. Journal of Commodity Markets, 29. p. 100306. DOI https://doi.org/10.1016/j.jcomm.2022.100306
Bermpei, Theodora and Karadimitropoulou, Aikaterini and Triantafyllou, Athanasios and Alshalahi, Jebreel (2023) Does commodity price uncertainty matter for the cost of credit? Evidence from developing and advanced economies. Journal of Commodity Markets, 29. p. 100306. DOI https://doi.org/10.1016/j.jcomm.2022.100306
Bermpei, Theodora and Karadimitropoulou, Aikaterini and Triantafyllou, Athanasios and Alshalahi, Jebreel (2023) Does commodity price uncertainty matter for the cost of credit? Evidence from developing and advanced economies. Journal of Commodity Markets, 29. p. 100306. DOI https://doi.org/10.1016/j.jcomm.2022.100306
Abstract
In this study, we focus on the effect of commodity price uncertainty on the cost of bank credit for a broad sample of loans traced to firms operating in developing and advanced economies. Using loan-level data for the 1990–2019 period, we find novel evidence that commodity price uncertainty, as estimated by a Bayesian Dynamic Factor Model, increases the cost of bank loans particularly for commodity dependent firms operating in developing countries vis-à-vis commodity dependent firms operating in advanced economies. In a further analysis, when examining the effect of group specific commodity price uncertainty on cost of borrowing, we find that agricultural price uncertainty significantly increases the cost of credit of commodity dependent firms operating in developing economies. We also find that commodity price uncertainty rises the cost of bank credit more for loans traced to firms locating in bank-based countries as compared to loans granted to firms operating in market-based economies, suggesting that the financial structure of a country could play an important role in passing through the borrowing costs to firms. Lastly, we also find that the effect of commodity price uncertainty is more pronounced for smaller firms operating in developing countries as opposed to smaller firms operating in developed countries. All in all, the above evidence provides useful policy implications, particularly, for the longevity of corporate sector operating in developing countries whereby the local financial structure poses serious threats to firms’ future earnings.
Item Type: | Article |
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Additional Information: | Source info: JCOMM-D-21-00170 |
Uncontrolled Keywords: | Commodity price uncertainty; Cost of bank loans; Dynamic factor model; Commodity dependent firms; Developing; emerging countries; Bank-based; market-based financial structure |
Divisions: | Faculty of Social Sciences Faculty of Social Sciences > Essex Business School |
SWORD Depositor: | Unnamed user with email elements@essex.ac.uk |
Depositing User: | Unnamed user with email elements@essex.ac.uk |
Date Deposited: | 20 Jan 2023 13:34 |
Last Modified: | 16 May 2024 21:11 |
URI: | http://repository.essex.ac.uk/id/eprint/34677 |
Available files
Filename: Full paper JCM.pdf
Licence: Creative Commons: Attribution-Noncommercial-No Derivative Works 4.0
Embargo Date: 22 December 2024