Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/229016 
Year of Publication: 
2020
Series/Report no.: 
ECB Working Paper No. 2402
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
We study how differences in the aggregate structure of corporate debt financing affect the transmission of monetary policy. Using high-frequency financial market data to identify monetary policy shocks in a panel of euro area countries, we find that: bond finance dampens the overall response of firm credit to monetary policy shocks in economies with a high initial share of bond- relative to bank-based finance; this effect weakens, and may even reverse, in economies with a low share of bond financing; and the dampening effect of a larger bond financing share also attenuates the ultimate impact of monetary policy on economic activity. These findings point to corporate bond markets acting as a "spare tire" in situations when bank lending contracts.
Subjects: 
Firm Financing Structure
Bank Lending
Corporate Bonds
High-Frequency Identification
Local Projections
JEL: 
E44
E52
G21
G23
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-4045-0
Document Type: 
Working Paper

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