Crossing the Credit Channel: Credit Spreads and Firm Heterogeneity

Ambrogio Cesa-Bianchi and Gareth Anderson

No 14426, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Firms with high leverage experience a more pronounced increase in credit spreads than firms with low leverage in response to a monetary policy tightening. A large fraction of this increase is due to a component of credit spreads that is in excess of firms' expected default risk. A stylized heterogeneous firm model with default risk, financially constrained intermediaries, and segmented financial markets is able to account for these facts. Our findings imply that financial intermediaries play an important role in shaping the transmission of monetary policy to firm-level outcomes.

Keywords: Monetary policy; Heterogeneity; Credit spreads; Excess bond premium; Credit channel; Financial accelerator; Event study; Identification (search for similar items in EconPapers)
JEL-codes: E44 F44 G15 (search for similar items in EconPapers)
Date: 2020-02
New Economics Papers: this item is included in nep-mac and nep-mon
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Citations: View citations in EconPapers (28)

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Related works:
Working Paper: Crossing the credit channel: credit spreads and firm heterogeneity (2020)
Working Paper: Crossing the Credit Channel: Credit Spreads and Firm Heterogeneity (2020)
Working Paper: Crossing the Credit Channel: Credit Spreads and Firm Heterogeneity (2020)
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