Did Unconventional Interventions Unfreeze the Credit Market?

Hui Tong and Shang-Jin Wei

American Economic Journal: Macroeconomics, 2020, vol. 12, issue 2, 284-309

Abstract: This paper investigates whether and how unconventional interventions in 2008–2010 unfroze the credit market. We construct a dataset of 198 interventions for 16 countries during 2008–2010 and examine heterogeneous responses in stock prices to the interventions across 7,873 nonfinancial firms in those countries. Stock prices increase when the interventions are announced, particularly for firms with greater intrinsic need for external capital. This pattern is corroborated by subsequent expansions in firm investment, R&D expenditure, and employment. Among various forms of interventions, recapitalization of banks appears particularly effective in channeling the intervention effects from financial to nonfinancial sectors.

JEL-codes: E44 E58 G01 G14 G21 G31 G32 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1257/mac.20160023

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