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Monetary Policy, Market Power, and SMEs

Author

Listed:
  • Annalisa Ferrando
  • Peter McAdam
  • Filippos Petroulakis
  • Xavier Vives

Abstract

Monetary policy aims to affect corporate borrowing by influencing the marginal costs of firms, but its potency can be conditioned by the degree of market competition. We first identify conditions under which changes in marginal costs have different effects on credit constraints and output under different competitive environments, in a simple Cournot competition setting. We then exploit a monetary policy easing shock in the euro area to examine whether policy pass-through is conditioned by market structure. We show that small firms within less concentrated sectors experienced a larger reduction in credit constraints than similar firms in more concentrated sectors.

Suggested Citation

  • Annalisa Ferrando & Peter McAdam & Filippos Petroulakis & Xavier Vives, 2023. "Monetary Policy, Market Power, and SMEs," AEA Papers and Proceedings, American Economic Association, vol. 113, pages 105-109, May.
    • Handle: RePEc:aea:apandp:v:113:y:2023:p:105-09
    DOI: 10.1257/pandp.20231006
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    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
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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