Falling Rates and Rising Superstars

Thomas Kroen, Ernest Liu, Atif Mian and Amir Sufi

No 29368, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using high frequency interest rate shocks, we find that falling rates in a low interest rate environment favor industry leaders. A fall in interest rate near the zero lower bound leads to a stronger decline in the borrowing rate for industry leaders, who also borrow more, invest more aggressively, and acquire assets at a faster pace. This advantage from falling rates enjoyed by industry leaders diminishes in a higher rate environment. We estimate a “competition-neutral” nominal federal funds rate of about four percentage points, a level at which industry leaders and followers are impacted equally from an interest rate change.

JEL-codes: E0 (search for similar items in EconPapers)
Date: 2021-10
New Economics Papers: this item is included in nep-fdg, nep-isf and nep-mac
Note: AP CF IO ME
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Citations: View citations in EconPapers (6)

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Working Paper: Falling Rates and Rising Superstars (2021)
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