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Posts tagged with: "MKTGDPCNA646NWDB"

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Are firms too attached to bonds?

The evolution of corporate debt securities

If you asked FRED how much the U.S. non-financial sector has in outstanding corporate debt securities (i.e., “bonds”), FRED would answer, “Nearly $6.24 trillion, which is over 30% of GDP, which is the highest it has been since the early 1950s.”

Non-financial corporate debt in the form of securities has grown about 6% on average year over year almost every quarter since 2014. Policymakers have recently voiced concerns about excessive borrowing by the corporate sector.

The graph above shows outstanding corporate debt securities as a share of GDP for four countries: the U.S., Japan, the U.K., and China. The ratio of corporate debt securities to GDP is higher in the U.S. than any of the other nations. Japan’s corporate debt-to-GDP ratio in 2017 was around 14%, the U.K. had a ratio of around 20%, and China had a ratio of around 22%. The ratio has increased substantially since the early 2000s, signaling the development and deepening of financial markets.

Now, this comparison provides an incomplete picture of total corporate debt, as corporations can borrow through securities as well as through loans from banks and other institutions. And countries differ in their borrowing traditions: Some prefer to rely on banks, others on security markets.

How this graph was created: Search for and select the series “Amount Outstanding of Total Debt Securities in Non-Financial Corporations Sector, All Maturities, Residence of Issuer in United States” and click “Add to Graph.” From the “Edit Graph” panel’s “Edit Line 1” tab, aggregate the data by choosing “Annual” in the “Modify frequency” dropdown. Then use the “Customize data” option to search for and add the series “Gross Domestic Product for United States, Current U.S. Dollars” to the same graph. Then, in the formula bar, type in a*10^6*100/b to adjust for the units of the first series and obtain corporate debt as a percentage of GDP. Repeat the above steps for the U.K, Japan, and China (using these countries’ respective GDPs).

Suggested by Asha Bharadwaj and Miguel de Faria e Castro.


China’s trade surplus since 2000

The trade balance of a country is defined as the difference between its exports and its imports. When exports are greater than imports, for example, a country runs a trade surplus, which has been the case for China at least for the past 16 years. Thanks to FRED, we can analyze each of the components separately: exports, imports, and the overall trade balance (all as a percentage of GDP).

The graph shows four interesting episodes, marked by the vertical lines.

  1. In 2001, China became a member of the World Trade Organization (WTO) and saw a big increase in both its exports and its imports. Trade remained roughly balanced, however, since the increases of both components were similar.
  2. From 2004 to 2007, China started to build large trade surpluses (from 1.7 percent of GDP in 2004 to 7.5 percent in 2007) mainly driven by an increase in its exports that wasn’t matched by an increase in imports. There are two reasons: Exports in manufacturing increased rapidly, especially machinery, electronic appliances, and transportation equipment. Imports of intermediate goods slowed down, since China began to produce them domestically. (More about this.).
  3. In 2007, the trade surplus started to decline when China’s exports decreased more than its imports. Global demand also went down as a result of the financial crisis that started in the United States and spilled over to the developed countries.
  4. Since 2011, China’s trade surplus has increased. Even though exports are still falling (due to weak global demand), for the past few years imports have decreased, mainly due to lower domestic demand and commodity prices (More about this.)

How this graph was created: Select the first two series listed here for Chinese exports and imports and select “Add to Graph.” For each of the series, choose “Modify Existing Series” to add the third series (GDP) and insert in the formula tab “a/b*100” to calculate exports and imports as a percentage of GDP. For the trade balance (exports minus imports), add the three series listed (exports, imports, and GDP) and modify by using the formula “(a-b)/c*100” to calculate the trade balance as a percent of GDP. To add the vertical lines to denote time periods, click “Add data series” and then “Add trend line.” Set the start date and end date to be the same, set the start value as 0 and the end value as where you want the line to end. For the y-axis positions, choose the right side for exports and imports and the left side for the trade balance.

Suggested by Ana Maria Santacreu and Usa Kerdnunvong.

View on FRED, series used in this post: MKTGDPCNA646NWDB, XTEXVA01CNA667N, XTEXVA01CNA667S, XTIMVA01CNA667N

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