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Quantitative easing, investment, and safe assets: the corporate-bond lending channel

Erasmo Giambona, Rafael Matta (), Jose-Luis Peydro () and Ye Wang

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We show that Quantitative Easing (QE) stimulates investment via a corporate-bond lending channel. Fed's large-scale purchases of MBS and treasuries creates a vacuum of safe assets, prompting safer firms to invest by issuing relatively "safe" bonds. Using micro-data around QE, we find that QE increases firm-level investment by 7.4 percentage points for firms with bond market access. Results hold excluding the financial crisis period. This growth is financed with senior bonds. We find no evidence of higher shareholders' payouts. The robust findings support a stylized model in which reducing the supply of treasuries lowers "safe" corporate bond yields, stimulating investment.

Keywords: Quantitative Easing (QE); Corporate-Bond Lending Channel; Investment; Safe Assets; Financing (search for similar items in EconPapers)
JEL-codes: E5 G01 G31 G32 G38 (search for similar items in EconPapers)
Date: 2020-05, Revised 2020-10
New Economics Papers: this item is included in nep-mac
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Working Paper: Quantitative Easing, Investment, and Safe Assets: The Corporate-Bond Lending Channel (2020) Downloads
Working Paper: Quantitative Easing, Investment, and Safe Assets: The Corporate-Bond Lending Channel (2020) Downloads
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