U.S. Monetary Policy Shock Spillovers: Evidence from Firm-Level Data

Furceri, Davide; Saxegaard, Elif Arbatli; Verrier, Jeanne; Firat, Melih

doi:10.5089/9798400219948.001

Cited by 5 publications

(7 citation statements)

References 25 publications

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“…Lastly, exploring the role of aggregate financial conditions, the findings show that firms with an initially larger expansion in leverage experience even larger declines in employment growth in the medium-term if financial conditions tighten, further pointing to a financial channel. These findings are in line with the recent firm-level empirical literature which adopts leverage as a proxy for financial vulnerabilities and finds that leverage buildups elevate financial fragility, making firms more prone to various shocks (Cai and Zhang 2011, Giroud and Mueller 2017, Ahn et al 2020, Arbatli-Saxegaard et al 2022, Kalemli-Ozcan et al 2022). 4 The empirical specifications adopt 3-year "sliding windows" to make the results comparable with Mian et al (2017) and Giroud and Mueller (2021).…”

Section: International Monetary Fundsupporting

confidence: 89%

Firm Leverage and Boom-Bust Cycles

Sever¹

2023

IMF Working Papers

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This paper explores the dynamic relationship between firm debt and real outcomes using data from 24 European economies over the period of 2000-2018. Based on macro data, it shows that a rise in credit to firms is associated with an increase in employment growth in the short-term, but employment growth declines in the medium-term. This pattern remains similar, even when the changes in credit to households are accounted for. Next, using data from a large sample of firms, it shows that firm leverage buildups predict similar boom-bust growth cycles in firm employment: Firms with a larger increase in leverage experience a boost in employment growth in the short-term, but employment growth decreases in the medium-term. Relatedly, the volatility of employment growth increases in the aftermath of firm leverage buildups. Finally, this paper provides suggestive evidence on the role of a financial channel in the relationship between firm leverage buildups and employment growth. The results show that a rise in firm leverage is associated with a persistently higher debt service ratio, pointing the drag on finances. Consistently, boom-bust growth cycles in the aftermath of firm leverage buildups are not limited to employment growth, but are also pronounced for investment. Moreover, the medium-term decline in firm employment growth as predicted by leverage buildups becomes even larger if aggregate financial conditions tighten. The findings are in favor of "lean against the wind" approach in policy making.

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Section: International Monetary Fundsupporting

confidence: 89%

Firm Leverage and Boom-Bust Cycles

Sever¹

2023

IMF Working Papers

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“…The second key finding is that the response for exporters appears if anything larger than for nonexporters, which is the opposite of the findings when we consider a shock to Australian monetary policy. This is observed for both SMEs and large firms (Table B6) and is consistent with other work focusing on the response of firm-level investment and sales in foreign countries following US policy shocks (Arbatli-Saxegaard et al 2022). While the differences are not statistically significant, the greater sensitivity of exporters to foreign shocks, and of non-exporters to domestic shocks, provides further evidence of the importance of the demand channel.…”

Section: Demand Channelsupporting

confidence: 89%

Do Monetary Policy and Economic Conditions Impact Innovation? Evidence from Australian Administrative Data

Majeed,

Hambur,

Breunig

2024

RBA Research Discussion Papers

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Recent papers have argued that monetary policy and economic conditions can influence the amount of innovative activity in the economy, and therefore productivity and living standards in the future. This paper examines whether this is the case for Australia, a small open economy that tends to import innovation from overseas. We find that contractionary (expansionary) monetary policy reduces (increases) aggregate research and development (R&D) spending, and that lower (higher) R&D spending reduces (increases) future productivity. However, using firm-level data and a broader survey measure of innovation that also captures adoption, we find heterogeneous responses across different firm types. Small firms decrease innovation in response to contractionary monetary policy shocks whereas large firms increase innovation. This heterogeneity appears to reflect differing exposure to the channels through which monetary policy affects innovation. These channels include affecting demand or affecting financial conditions and constraints. We also find that US monetary policy spills over and affects Australian firms' innovation. Overall, our results suggest that monetary policy and economic conditions have medium-run effects on productivity, though the effects are more heterogeneous than previously documented. While the effects may cancel out over a cycle, this finding highlights the importance of stabilisation policy in preventing medium-run economic scarring.

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“…For country i and year y, I compute the share of outbound FDI position to countries included in these two regions relative to the total outbound FDI made by country i. I exclude non-EU tax haven countries from this analysis. 2 Then I compute the average of such share for the period between 2009 and 2020. Figure A.4 shows the average share per country in the sample.…”

Section: National Mnes Operating Abroadmentioning

confidence: 99%

Consolidated Foreign Wealth of Nations Nationality-based measures of international exposure

Pacheco

2023

Preprint

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This paper presents novel estimates of foreign holdings from a consolidated-bynationality perspective for a sample of fourteen developed countries over multiple years. It describes the stylized facts that emerge from this new data-set on the international exposure of countries. It shows that aggregate international financial integration is larger from a nationality-based approach relative to the conventional residence-based data. These novel data are used to analyze (1) profit shifting activities and (2) spillovers from U.S. monetary policy shocks. I find evidence suggesting that nationals of relatively high-tax countries may shift assets to low-tax countries in ways not fully captured in residence-based statistics. I also find that a tightening in U.S. monetary policy is associated with a decline in consolidated-by-nationality foreign asset holdings by non-financial multinational enterprises. Such findings highlight the usefulness of this new data-set in international macroeconomics. JEL: F36, F21, F23.

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U.S. Monetary Policy Shock Spillovers: Evidence from Firm-Level Data

Cited by 5 publications

References 25 publications

Firm Leverage and Boom-Bust Cycles

Firm Leverage and Boom-Bust Cycles

Do Monetary Policy and Economic Conditions Impact Innovation? Evidence from Australian Administrative Data

Consolidated Foreign Wealth of Nations Nationality-based measures of international exposure

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