Monetary Policy and Corporate Debt Structure

Lhuissier, Stéphane; Szczerbowicz, Urszula

doi:10.2139/ssrn.3267904

Cited by 9 publications

(13 citation statements)

References 39 publications

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“…Panel C and D shows that firms adjust their debt mix marginally toward bonds following a monetary contraction. The direction of this effect is in line with existing evidence (Lhuissier and Szczerbowicz, 2018;Becker and Ivashina, 2014). Note that we do not take a stance on why the pass-through of monetary policy would be different across loans and bonds, and the empirical determinants of this spread are still an open question (Schwert, 2018).…”

Section: Relative Prices and Credit Flowssupporting

confidence: 82%

The Bond Lending Channel of Monetary Policy

2019

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An increasing share of firms' borrowing occurs through bond markets. We present high-frequency evidence from the Eurozone that bond-reliant firms are more responsive to monetary shocks: in contrast to standard bank lending channel predictions, unexpected ECB policy changes affect their stock prices by more, even conditional on total debt and industry fixed-effects. We develop an organizing framework to decompose the stock price, credit risk and investment response of large firms. We emphasize the role of corporate liquidity management: firms react to rate hikes by being prudent in good times, reducing investment in favor of hoarding liquid assets. Since bond financing is less flexible in bad times than relationship banking, this effect can rationalize why the mix of bank and bond financing matters for monetary transmission. A mitigating force is that bonds generally have longer duration and lower interest-rate pass-through relative to loans. Our findings suggest that the recent global growth in bond debt following quantitative easing could interact with conventional interest rate policy going forward.

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Section: Relative Prices and Credit Flowssupporting

confidence: 82%

The Bond Lending Channel of Monetary Policy

2019

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“…See Elbourne and Ji (2019) and Boeckx, Dossche, Galesi, Hofmann, and Peersman (2019). 5 For example, Gambacorta, Hofmann, and Peersman (2014) Gertler and Karadi (2015), Li and Zanetti (2016), Jarociński and Karadi (2020), Lhuissier and Szczerbowicz (2018), and Caldara and Herbst (2019). Kim, Laubach, and Wei (2020) deploy a strategy closer to our benchmark specification; the authors estimate the macroeconomic effects of Federal Reserve's large scale asset purchases (LSAP) using a structural VAR with external instruments.…”

Section: Literature Reviewmentioning

confidence: 99%

The Dynamic Effects of the ECB’s Asset Purchases: A Survey-Based Identification

Lhuissier

Nguyen

2021

SSRN Journal

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This paper estimates the dynamic effects of the ECB's asset purchase programme (APP) using a proxy structural vector autoregression. We construct a novel proxy for structural APP shocks as unexpected changes in the size of additional purchases announced by the ECB. Unexpected changes are inferred from public expectations released in quantitative surveys just before monetary policy announcements. The results consistently show that innovations to APP have expansionary effects on both output and prices: an immediate increase in asset purchases of one percent of GDP leads to a maximum impact in industrial production and consumer prices by 0.15 percent and 0.06 percent, respectively. Overall, APP shocks account for less than a fifth of the long-run macroeconomic variability. Finally, our counterfactual analyses indicate that APP and its successive recalibrations were central in supporting inflation. For example, we find inflation would have fallen into negative territory without December 2015 and March 2016 APP recalibrations.

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“…Following this logic, which essentially treats the policy events as a controlled experiment, HFI has been applied in a host of papers studying the impact of monetary policy on the US economy and financial mar-kets (Kuttner (2001); Cochrane and Piazzesi (2002); Gürkaynak et al (2005); Piazzesi and Swanson (2008); Barakchian and Crowe (2013); Gertler and Karadi (2015); Nakamura and Steinsson (2018)). More recently, a nascent literature has adopted this approach to similar applications in the euro area context (Lhuissier and Szczerbowicz (2018); Andrade and Ferroni (2018); Jarocinski and Karadi (forthcoming); Altavilla, Brugnolini, Gürkaynak, Motto and Ragusa (2019); Auer et al (2019)).…”

Section: Identification Strategy and Estimationmentioning

confidence: 99%

“…Further, several recent studies, e.g. including Lhuissier and Szczerbowicz (2018), Arce et al (2017) and Grosse-Rueschkamp et al (2019), distinguish between conventional and unconventional monetary policy (or zoom in on specific unconventional measures such as the ECB's corporate sector purchase program) and find differences in the response patterns across financing instruments. Finally, Crouzet (2019) presents a structural model that incorporates the countervailing mechanisms by which monetary policy shocks may affect firm financing structures and tests these mechanisms in a panel of US firms.…”

Section: Introductionmentioning

confidence: 99%