Foreign investment dynamics: The impact of benchmark-driven versus unconstrained investors on local credit conditions
Authors
Botero-Ramírez, Oscar David
Murcia, Andrés
Villamizar-Villegas, Mauricio
Editor
Publication date
2025-05-07
Document language
eng
Publisher
Metrics
downloads: 0
abstract_views: 0
Journal Title
Journal ISSN
Volume Title
Abstract
We examine the impact of foreign investor heterogeneity on local lending, focusing on Colombia from 2014 to 2023. Distinguishing between benchmark-driven and unconstrained investors, we highlight their differing responses to global and idiosyncratic shocks. Using bond-level data and the corporate credit registry, we link banks’ exposure to foreign flows with firm-level lending decisions. By decomposing Colombia’s weight in the J.P. Morgan GBI-EM index into valuation and exogenous components, we identify how investor behavior shapes bank balance sheets. Our main findings show that banks with greater exposure to unconstrained investors significantly expand lending during capital inflows, whereas those linked to benchmark-driven investors exhibit a more muted response. These results emphasize the role of investor composition in financial stability and provide key insights for policymakers in emerging markets.
Description
Códigos JEL
F3 - International Finance, F4 - Macroeconomic Aspects of International Trade and Finance, G01 - Financial Crises, G11 - Portfolio Choice; Investment Decisions, G12 - Asset Pricing; Trading Volume; Bond Interest Rates, G15 - International Financial Markets
item.page.subjectjelspa
Keywords
Capital flows, Foreign investment, Investor classification, J.P. Morgan GBI-EM index, Emerging markets
