Employment and the collateral channel of monetary policy

Saleem Bahaj, Angus Foulis, Gabor Pinter and Paolo Surico

No 827, Bank of England working papers from Bank of England

Abstract: This paper uses detailed firm-level data to show that monetary policy affects employment through housing collateral and corporate debt. Our research design exploits the fact that many small and medium-sized enterprises use their directors' homes as a key source of collateral for corporate loans, but directors typically live in a different region to their firm. This spatial separation of firms from their collateral allows us to distinguish the collateral channel from local demand effects. We find that younger and more levered firms with higher exposure to housing collateral fluctuations adjust employment the most following a change in monetary policy. The collateral channel explains a sizeable share of the aggregate employment response.

Keywords: Firm heterogeneity; residential collateral; financial accelerator (search for similar items in EconPapers)
JEL-codes: D22 E52 R30 (search for similar items in EconPapers)
Pages: 123 pages
Date: 2019-09-20
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Related works:
Working Paper: Employment and the Collateral Channel of Monetary Policy (2018)
Working Paper: Employment and the collateral channel of monetary policy (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0827

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