Corporate debt composition, access to credit, and monetary policy

Adam Gulan and Aino Silvo

No 7/2026, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: In both the U.S. and the euro area, the share of market finance in aggregate corporate credit has grown over time. To study the implications of the corporate debt structure for the transmission of monetary policy, we develop a New Keynesian DSGE model in which firms differ in productivity and may finance themselves with either bonds or loans. Our setup makes the aggregate corporate debt composition and firms' credit access endogenous and dependent on aggregate economic conditions. The model rationalizes the empirically documented substitution from bank loans to bond finance following a monetary policy contraction. Credit is squeezed for those bank-dependent firms that cannot access the bond market. A structural shift in the aggregate bond-to-loan ratio among credit-eligible firms affects financial market dynamics, but does not materially change the overall impact of monetary policy shocks on the macroeconomy. Instead, in an economy with greater credit access, aggregate demand is less responsive to monetary policy shocks.

Keywords: Monetary policy; corporate debt; bonds; bank credit (search for similar items in EconPapers)
JEL-codes: E32 E44 E52 G32 (search for similar items in EconPapers)
Date: 2026
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