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Crossing the Credit Channel: Credit Spreads and Firm Heterogeneity

Author

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  • Gareth Anderson
  • Ambrogio Cesa-Bianchi

Abstract

Firms with high leverage experience a more pronounced increase in credit spreads than firms with low leverage in response to a monetary policy tightening. A large fraction of this increase is due to a component of credit spreads that is in excess of firms' expected default risk. A stylized heterogeneous firm model with default risk, financially constrained intermediaries, and segmented financial markets is able to account for these facts. Our findings imply that financial intermediaries play an important role in shaping the transmission of monetary policy to firm-level outcomes.

Suggested Citation

  • Gareth Anderson & Ambrogio Cesa-Bianchi, 2024. "Crossing the Credit Channel: Credit Spreads and Firm Heterogeneity," American Economic Journal: Macroeconomics, American Economic Association, vol. 16(3), pages 417-446, July.
    • Handle: RePEc:aea:aejmac:v:16:y:2024:i:3:p:417-46
    DOI: 10.1257/mac.20210455
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    Citations

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    Cited by:

    1. Joachim Jungherr & Matthias Meier & Timo Reinelt & Immo Schott, 2022. "Corporate Debt Maturity Matters For Monetary Policy," CRC TR 224 Discussion Paper Series crctr224_2022_360, University of Bonn and University of Mannheim, Germany.
    2. Michael D. Bauer & Eric Offner & Glenn D. Rudebusch, 2024. "Green Stocks and Monetary Policy Shocks: Evidence from Europe," Working Paper Series 2024-38, Federal Reserve Bank of San Francisco.
    3. Bauer, Michael D. & Offner, Eric A. & Rudebusch, Glenn D., 2024. "Green stocks and monetary policy shocks: Evidence from Europe," IMFS Working Paper Series 215, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).

    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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