Bottleneck effects of monetary policy

Emilia Garcia-Appendini, Frédéric Boissay and Steven Ongena
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Frédéric Boissay: Bank for International Settlements (BIS)

No 22-97, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Is monetary policy transmitted through markets for intermediate goods? Analyzing US data on corporate linkages, we document that the financial health of downstream and upstream firms plays a key role in monetary policy transmission. Our estimates suggest that contractionary changes in monetary conditions lead to reductions in demand and supply of financially constrained firms downstream and upstream. These reductions create bottlenecks inducing the "middle" linked firms to curtail their own activities. Overall these "bottleneck effects" coming from changes in demand and supply by constrained partners have a larger impact on a firm's operations than the firm's own financial conditions.

Keywords: Monetary policy transmission; supply chain; aggregate demand; cost channel. (search for similar items in EconPapers)
JEL-codes: E52 G32 (search for similar items in EconPapers)
Pages: 64 pages
Date: 2022-12
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fdg, nep-ifn and nep-mon
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Working Paper: Bottleneck effects of monetary policy (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2297

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