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Employment and the residential collateral channel of monetary policy

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  • Bahaj, Saleem
  • Foulis, Angus
  • Pinter, Gabor
  • Surico, Paolo

Abstract

Using micro-data covering private and public UK firms, we document heterogeneous responses to monetary policy; finding that employment at younger, more-levered firms is most sensitive. This heterogeneity is consistent with firm-level financial constraints. To show this, we exploit the fact that the homes of company directors are a key source of corporate collateral, but many directors live in a different region to their firm, allowing specifications controlling for demand. Younger, more-levered firms exposed to collateral fluctuations drive the employment response, showing a residential collateral channel in the transmission of monetary policy to firms.

Suggested Citation

  • Bahaj, Saleem & Foulis, Angus & Pinter, Gabor & Surico, Paolo, 2022. "Employment and the residential collateral channel of monetary policy," Journal of Monetary Economics, Elsevier, vol. 131(C), pages 26-44.
    • Handle: RePEc:eee:moneco:v:131:y:2022:i:c:p:26-44
    DOI: 10.1016/j.jmoneco.2022.07.002
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    3. Priit Jeenas, 2023. "Firm Balance Sheet Liquidity, Monetary Policy Shocks, and Investment Dynamics," Working Papers 1409, Barcelona School of Economics.
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    More about this item

    Keywords

    Firm heterogeneity; Financial constraints; SME financing; Monetary policy transmission;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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