Causal Effects of the Fed's Large-Scale Asset Purchases on Firms' Capital Structure

Andrea Nocera and Mohammad Pesaran

No 9695, CESifo Working Paper Series from CESifo

Abstract: We investigate the short- and long-term impacts of the Federal Reserve’s large-scale asset purchases (LSAPs) on non-financial firms’ capital structure using a threshold panel ARDL model. To isolate the effects of LSAPs from other macroeconomic conditions, we interact firm- and industry-specific indicators of debt capacity with measures of LSAPs. We find that LSAPs facilitated firms’ access to external financing, with both Treasury and MBS purchases having positive effects. Our model also allows us to estimate the time profile of the effects of LSAPs on firm leverage providing robust evidence that they are long-lasting. These effects have a half-life of 4-5 quarters and a mean lag length of about six quarters. Nevertheless, the magnitudes are small, suggesting that LSAPs have contributed only marginally to the rise in U.S. corporate debt ratios of the past decade.

Keywords: capital structure; identification; interactive effects; leverage; threshold panel ARDL; quantitative easing; unconventional monetary policy (search for similar items in EconPapers)
JEL-codes: C32 E44 E52 E58 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-cfn, nep-fdg, nep-mac and nep-mon
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Related works:
Working Paper: Causal effects of the Fed's large-scale asset purchases on firms' capital structure (2023)
Working Paper: Causal effects of the Fed's large-scale asset purchases on firms' capital structure (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9695

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