The Bond Lending Channel of Monetary Policy

Alexander Rodnyansky and Olivier Darmouni

No 14659, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: The share of firms’ borrowing from bond markets has been rising globally, and notably in the Eurozone. How does debt structure affect the transmission of monetary policy? We present a high-frequency framework that combines identified monetary shocks with a cross-sectional firm-level stock price reaction. Firms with more bonds are disproportionately affected by surprise monetary actions relative to other firms in the Eurozone. This finding stands in contrast to the predictions of a standard bank lending channel and points toward bond financing not being a frictionless "spare tire."

Keywords: Monetary policy; Corporate bonds; Banking relationships; Corporate finance; Financial distress (search for similar items in EconPapers)
JEL-codes: E44 E52 G21 G23 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-cfn, nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Working Paper: The Bond Lending Channel of Monetary Policy (2020)
Working Paper: The Bond Lending Channel of Monetary Policy (2019)
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