Crossing the Credit Channel: Credit Spreads and Firm Heterogeneity

Gareth Anderson and Ambrogio Cesa-Bianchi

American Economic Journal: Macroeconomics, 2024, vol. 16, issue 3, 417-46

Abstract: Firms with high leverage experience a more pronounced increase in credit spreads than firms with low leverage in response to a monetary policy tightening. A large fraction of this increase is due to a component of credit spreads that is in excess of firms' expected default risk. A stylized heterogeneous firm model with default risk, financially constrained intermediaries, and segmented financial markets is able to account for these facts. Our findings imply that financial intermediaries play an important role in shaping the transmission of monetary policy to firm-level outcomes.

JEL-codes: D22 E43 E44 E52 G32 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (4)

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DOI: 10.1257/mac.20210455

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