FINANCIAL AND ECONOMIC REGULATION

BOHDAN Tetiana ¹

¹NGO “Growford Institute”
OrcID ID : https://orcid.org/0000-0002-6133-5336

Trends of global financial market under the impact of public debt in developed countries

Basic structural changes and modifications of the global financial market related to public debt growth in the developed countries after the global crisis of 2007-2009 are identified in the article. The author analyses the changes of global ""appetite for risks”, borrowing cost for public and private sectors of economy in developed countries, as well as the changes of global liquidity. An attention is drawn to the problems of banks’ financial state instability and forming a ""loop of feed-backs” between bank and sovereign balances, problems of an increase of the interest rates for corporate sector and crowding out of the private investments by public loans, and also high dependence on the global factors of the magnitudes of foreign capital inflows to the emerging markets. The author proves that a change of public debt burden in the developed countries, as one of the determinant of global ""appetite for risks”, affects the costs of external financing for emerging markets. Multipleregression models are specified, they allow to estimate the impact of global factors and domestic risks on the level of spreads for emerging markets and the level of ""EMBI Global Ukraine” spread which is a key component of the interest rates by corporate and public borrowings in Ukraine. The author concludes that an increase of global volatility index VIX by 1 % results in growth of ""EMBI Global” spread by 9,6 b. p., as well as growth of ""EMBI Global Ukraine” spread by 42 b. p.

Keywords: financial market, global liquidity, ""appetite for risks”, public debt, sovereign bonds spreads, banking loans.

JEL: G15, H63, C22

BOHDAN T. . Trends of global financial market under the impact of public debt in developed countries / T. . BOHDAN // Фінанси України. - 2014. - № 7. - C. 31-48.