Corporate Credit Provision

Nina Boyarchenko, Leonardo Elias and Philippe Mueller ()

No 895, Staff Reports from Federal Reserve Bank of New York

Abstract: Productive firms can access credit markets directly—by issuing corporate bonds—or in an intermediated manner—by borrowing through loans. In this paper, we study how the macroeconomic environment, including inflation, the stage of business cycle, and the stance of monetary policy, affects firms’ decisions of which debt market to access. Tighter monetary policy leads to firms borrowing more using intermediated credit, while higher inflation rates lead firms to lock in financing rates by issuing corporate bonds. Moreover, we also explore the role that heterogeneity in leverage across different types of financial institutions plays in the composition of nonfinancial firms’ financing. We show that increases in leverage in the traditional banking sector lead to a substitution from loans into bonds.

Keywords: intermediated credit; leverage cycles; corporate bonds (search for similar items in EconPapers)
JEL-codes: G21 G22 G23 G32 (search for similar items in EconPapers)
Pages: 63
Date: 2019-08-01
New Economics Papers: this item is included in nep-cfn
Note: Revised September 2023.
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Citations: View citations in EconPapers (3)

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