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Corporate lending and interest rate: Determining exogenous factors

Vol. 15, Iss. 12, DECEMBER 2019

Received: 2 October 2019

Received in revised form: 20 October 2019

Accepted: 11 November 2019

Available online: 13 December 2019

Subject Heading: ECONOMIC SECURITY

JEL Classification: E44, F34, F51, G15

Pages: 2274–2283

https://doi.org/10.24891/ni.15.12.2274

Omel'chenko A.N. Central Economics and Mathematics Institute of RAS (CEMI RAS), Moscow, Russian Federation
alexey.n.omelchenko@gmail.com

ORCID id: not available

Khrustalev E.Yu. Central Economics and Mathematics Institute of RAS (CEMI RAS), Moscow, Russian Federation
stalev777@yandex.ru

ORCID id: not available

Subject This article reviews how endogenous and exogenous factors influence debt financing and interest rates as their key component.
Objectives The study examines key determinants of corporate lending cost so as to subsequently measure the percentage each of them influences on it, illustrating the case of the Russian economy and considering distinctions of the current economic cycle, such as the sanction originated shock and different vectors of the monetary policy regulating interest rates on USD, EUR and RUB.
Methods The methodological framework includes a set of methods and principles for learning and research, methods of logic analysis, statistical analysis.
Results We present a set of exogenous factors determining the interest rate for corporate lending. The macroeconomic model for costing of corporate debt should be extended to include factors of geopolitical (sanction-based) shock, disparity of risks within the banking environment, performance of banks, in addition to monetary policy and credit risks.
Conclusions and Relevance Even a small percentage of capitalized and feasible (in terms of operating expenses) banks is showed to help cushion an adverse effect of external shocks on the cost of lending for the real economy.

Keywords: interest rate, debt capital market, corporate financing, cost of funding

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