Monetary Policy, Corporate Finance and Investment

Abstract

The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Crossing the Credit Channel: Credit Spreads and Firm Heterogeneity

“…Note that the results are virtually unchanged (if anything slightly stronger) if we estimate specification (7) on pre-crisis data as in Jeenas (2018), Ottonello and Winberry (2018), and Cloyne et al (2018); as well as if we compute our high-leverage dummy based on within- Ottonello and Winberry (2018) (results reported in Appendix G).…”

“…Ottonello and Winberry (2018) show that borrowing costs are persistently lower for high-leverage firms relative to low-leverage firms following a monetary policy tightening. 17 In contrast, Cloyne et al (2018) show that younger non-dividend paying firms experience a persistent increase in borrowing costs relative to older dividend paying firms. While our evidence aligns better with the findings in Cloyne et al (2018), both approaches have the drawback of measuring borrowing costs with interest related expenses.…”

“…17 In contrast, Cloyne et al (2018) show that younger non-dividend paying firms experience a persistent increase in borrowing costs relative to older dividend paying firms. While our evidence aligns better with the findings in Cloyne et al (2018), both approaches have the drawback of measuring borrowing costs with interest related expenses. Interest payments can differ substantially from the marginal borrowing cost on new borrowing, which is what economic theory has predictions about.…”

“…1 Following the seminal contribution of Gertler and Gilchrist (1994), recent studies have investigated the relative strength of these two channels by looking at the response of constrained versus unconstrained firms to monetary policy, and reached contrasting conclusions (e.g. Ottonello and Winberry, 2018, Jeenas, 2018, Cloyne et al, 2018.…”

The Bond Lending Channel of Monetary Policy

“…We further complement the literature that shows how policies stimulating bond markets can have aggregate effects through the substitution of bank loans toward bonds (Balloch, 2018;Grosse-Rueschkamp, Steffen, and Streitz, 2019;Arce, Gimeno, and Mayordomo, 2018). We relate to extensive literature on corporate liquidity management (see Almeida, Campello, Cunha, and Weisbach (2014) for a survey), and particularly to recent works stressing the role of corporate finance in monetary transmission (Rocheteau, Wright, and Zhang, 2018;Acharya and Plantin, 2019;Cloyne, Ferreira, Froemel, and Surico, 2018).…”