Monetary Policy, Market Power, and SMEs

Annalisa Ferrando, Peter McAdam (), Filippos Petroulakis and Xavier Vives

AEA Papers and Proceedings, 2023, vol. 113, 105-09

Abstract: Monetary policy aims to affect corporate borrowing by influencing the marginal costs of firms, but its potency can be conditioned by the degree of market competition. We first identify conditions under which changes in marginal costs have different effects on credit constraints and output under different competitive environments, in a simple Cournot competition setting. We then exploit a monetary policy easing shock in the euro area to examine whether policy pass-through is conditioned by market structure. We show that small firms within less concentrated sectors experienced a larger reduction in credit constraints than similar firms in more concentrated sectors.

JEL-codes: D22 E43 E52 G31 G32 L25 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1257/pandp.20231006

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