Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/297300 
Year of Publication: 
2023
Series/Report no.: 
ECB Working Paper No. 2860
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
We study the heterogeneous impact of jointly identified monetary policy and global risk shocks on corporate funding costs. We disentangle these two shocks in a structural Bayesian Vector Autoregression framework and investigate their respective effects on funding costs of heterogeneous firms using micro-data for the US. We tease out mechanisms underlying the effects by contrasting financial frictions arising from traditional asset-based collateral constraints with the recent earnings-based borrowing constraint hypothesis, differentiating firms across leverage and earnings. Our empirical evidence strongly supports the earnings-based borrowing constraint hypothesis. We find that global risk shocks have stronger and more heterogeneous effects on corporate funding costs which depend on firms' position within the earnings distribution.
Subjects: 
corporate spreads
earnings-based borrowing constraint
heterogeneous firms
monetary policy shocks
global risk shocks
JEL: 
G12
E43
E52
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-6225-4
Document Type: 
Working Paper

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