IDEAS home Printed from https://ideas.repec.org/p/bon/boncrc/crctr224_2022_360.html
   My bibliography  Save this paper

Corporate Debt Maturity Matters For Monetary Policy

Author

Listed:
  • Joachim Jungherr
  • Matthias Meier
  • Timo Reinelt
  • Immo Schott

Abstract

We provide novel empirical evidence that firms’ investment is more responsive to monetary policy when a higher fraction of their debt matures. In a heterogeneous firm New Keynesian model with financial frictions and endogenous debt maturity, two channels explain this finding: (1.) Firms with more maturing debt have larger roll- over needs and are therefore more exposed to fluctuations in the real interest rate (roll-over risk). (2.) These firms also have higher default risk and therefore react more strongly to changes in the real burden of outstanding nominal debt (debt overhang). In comparison to existing models, we show that a model which accounts for the maturity of debt and its distribution across firms implies larger aggregate effects of monetary policy.

Suggested Citation

  • 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.
    • Handle: RePEc:bon:boncrc:crctr224_2022_360
    as

    Download full text from publisher

    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp360
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Valère Fourel & Alice Schwenninger, 2024. "The Impact of the PEPP on the Corporate Commercial Paper Market," Working papers 946, Banque de France.
    2. Stéphane Dupraz, 2023. "The Dynamic IS Curve when there is both Investment and Savings," Working papers 905, Banque de France.
    3. Holm-Hadulla, Fédéric & Thürwächter, Claire, 2024. "Granular shocks to corporate leverage and the macroeconomic transmission of monetary policy," Working Paper Series 2891, European Central Bank.
    4. Banna, Hasanul & Alam, Ashraful & Chen, Xihui Haviour & Alam, Ahmed W., 2023. "Energy security and economic stability: The role of inflation and war," Energy Economics, Elsevier, vol. 126(C).
    5. Jin Cao & Torje Hegna & Martin B. Holm & Ragnar Juelsrud & Tobias König & Mikkel Riiser, 2023. "The Investment Channel of Monetary Policy : Evidence from Norway," Working Paper 2023/5, Norges Bank.
    6. Fedajev, Aleksandra & Mitić, Petar & Kojić, Milena & Radulescu, Magdalena, 2023. "Driving industrial and economic growth in Central and Eastern Europe: The role of electricity infrastructure and renewable energy," Utilities Policy, Elsevier, vol. 85(C).

    More about this item

    Keywords

    monetary policy; investment; corporate debt; debt maturity;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • 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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bon:boncrc:crctr224_2022_360. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CRC Office (email available below). General contact details of provider: https://www.crctr224.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.