Heterogeneity in corporate debt structures and the transmission of monetary policy
Fédéric Holm-Hadulla and
No 2402, Working Paper Series from European Central Bank
We study how differences in the aggregate structure of corporate debt financing affect the transmission of monetary policy. Using high-frequency financial market data to identify monetary policy shocks in a panel of euro area countries, we find that: bond finance dampens the overall response of firm credit to monetary policy shocks in economies with a high initial share of bond- relative to bank-based finance; this effect weakens, and may even reverse, in economies with a low share of bond financing; and the dampening effect of a larger bond financing share also attenuates the ultimate impact of monetary policy on economic activity. These findings point to corporate bond markets acting as a “spare tire” in situations when bank lending contracts. JEL Classification: E44, E52, G21, G23
Keywords: bank lending; corporate bonds; firm financing structure; high-frequency identification; local projections (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20202402
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