Bond market stimulus: Firm-level evidence

Olivier Darmouni and Kerry Y. Siani

Journal of Monetary Economics, 2025, vol. 151, issue C

Abstract: How do asset purchases by central banks transmit to the real economy? Using micro-data on corporate balance sheets, we study firm behavior after the unprecedented policy support to corporate bond markets in 2020. As bond yields fell, firms issued bonds to accumulate large and persistent amounts of liquid assets. The effect on real investment was generally weak: many issuers already had access to bank liquidity and maintained equity payouts, while others used bond funds to pay back bank debt. This evidence sheds light on how corporate liquidity and financial heterogeneity matter for the macro-economy and the transmission of unconventional monetary policy.

Keywords: Corporate bonds; Unconventional monetary policy; Corporate liquidity (search for similar items in EconPapers)
JEL-codes: E44 E52 G23 G32 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:151:y:2025:i:c:s0304393224001818

DOI: 10.1016/j.jmoneco.2024.103728

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