Crossing the Credit Channel: Credit Spreads and Firm Heterogeneity

Gareth Anderson and Ambrogio Cesa-Bianchi

No 2020/267, IMF Working Papers from International Monetary Fund

Abstract: Credit spreads rise after a monetary policy tightening, yet spread reactions are heterogeneous across firms. Exploiting information from a panel of corporate bonds matched with balance sheet data for U.S. non-financial firms, we document that firms with high leverage experience a more pronounced increase in credit spreads than firms with low leverage. A large fraction of this increase is due to a component of credit spreads that is in excess of firms' expected default. Our results suggest that frictions in the financial intermediation sector play a crucial role in shaping the transmission mechanism of monetary policy.

Keywords: monetary policy; heterogeneity; credit spreads; excess bond premium; credit channel; financial accelerator; event study (search for similar items in EconPapers)
Pages: 67
Date: 2020-12-04
New Economics Papers: this item is included in nep-cfn
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Citations: View citations in EconPapers (31)

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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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