Corporate bonds, exchange rates and business strategy

Abstract

We examine the relationship between corporate bonds and exchange rates in the USA and Greece highlighting asymmetries and volatility among markets. A theoretical framework is constructed to treat the issue of corporate bonds. The employed methodology concerns the QARDL-ECM that is applied to non-stationary regressors. In Greece, our key findings point that changes in corporate bonds are mainly driven by changes in exchange rates. The quantile estimates show that the strength of long-run relationship increases as the risk of default for the country diminishes. In the USA, both long-run and short-run relationships between variables are defined. The changes in exchange rates are mainly driven by changes in corporate bonds. The quantile estimates exhibit a non-symmetrical pattern of the relationship which is a clear evidence of possible financing problems in enterprises. A key contribution concerns the suggestion of a sound policy for the enterprises for attaining stable growth in an environment of financial stress and asymmetry.