Financing of Firms, Labor Reallocation and the Distributional Role of Monetary Policy

Salem Abo-Zaid and Anastasia Zervou

No 20161020_001, Working Papers from Texas A&M University, Department of Economics

Abstract: We analyze monetary policy in a heterogenous firms environment where cash con- strained firms finance operations through external financing and cash unconstrained firms operate by using internal funds. We show that firms respond differently to shocks: expansionary monetary policy sharply increases the relative employment of the cash constrained firms while positive productivity shocks induce a rise in the relative employment of the cash unconstrained firms. Our analysis points to a clear role of monetary policy in reallocating resources across sectors that differ in their financing capabilities. Furthermore, the predictions of our model match the empirical evidence implying that financially constrained firms react sharply to monetary policy shocks but are less cyclical than unconstrained firms following productivity shocks.

Keywords: Heterogeneous Firms; Monetary Policy; Labor Reallocation; Firms’ financing (search for similar items in EconPapers)
JEL-codes: E32 E44 E52 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2016-10-20
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://pvsessions.tamu.edu/RePEc/zervoufirmsfinance.pdf First version, 2016 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to pvsessions.tamu.edu:443 (No such host is known. )

Related works:
Journal Article: Financing of Firms, Labor Reallocation, and the Distributional Role of Monetary Policy (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:txm:wpaper:20161020_001

Access Statistics for this paper

More papers in Working Papers from Texas A&M University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Pedro Bento ().