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Firm Balance Sheets And Monetary Policy Transmission
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Book Synopsis Firm Balance Sheets and Monetary Policy Transmission by : Adam B. Ashcraft
Download or read book Firm Balance Sheets and Monetary Policy Transmission written by Adam B. Ashcraft and published by . This book was released on 2006 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: Exploring the functioning of internal capital markets in financial conglomerates, this paper conducts a novel test of the credit channel of monetary policy. We look at differences in the response of lending to monetary policy shocks across small banks that are affiliated with the same bank holding company but that operate in different geographical areas. These banks tap into the same pool of funds but face different pools of borrowers. Because small subsidiary banks concentrate their lending with small local businesses (whose fortunes are tied to their local economies), we can exploit cross-sectional differences in local economic conditions at the time of a monetary policy shock to study whether the strength of borrowers' balance sheets influences the response of bank lending to policy. We find evidence that the negative response of bank loan growth to a monetary contraction is significantly more (less) pronounced when borrowers are more likely to have weak (strong) balance sheets. On the flip side, borrowers with weak balance sheets obtain more new bank credit than other borrowers in monetary expansions. Our results are consistent with the operation of a demand-driven transmission mechanism that works independently of the bank-supply (lending) channel. In fact, our estimates suggest that borrowers' balance sheet strength accounts for a significant fraction of the broad credit channel of monetary policy.
Book Synopsis Monetary Policy and Balance Sheets by : Ms.Deniz Igan
Download or read book Monetary Policy and Balance Sheets written by Ms.Deniz Igan and published by International Monetary Fund. This book was released on 2013-07-03 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper evaluates the strength of the balance sheet channel in the U.S. monetary policy transmission mechanism over the past three decades. Using a Factor-Augmented Vector Autoregression model on an expanded data set, including sectoral balance sheet variables, we show that the balance sheets of various economic agents act as important links in the monetary policy transmission mechanism. Balance sheets of financial intermediaries, such as commercial banks, asset-backed-security issuers and, to a lesser extent, security brokers and dealers, shrink in response to monetary tightening, while money market fund assets grow. The balance sheet effects are comparable in magnitude to the traditional interest rate channel. However, their economic significance in the run-up to the recent financial crisis was small. Large increases in interest rates would have been needed to avert a rapid rise of house prices and an unsustainable expansion of mortgage credit, suggesting an important role for macroprudential policies.
Book Synopsis The Transmission Channels of Unconventional Monetary Policy by : Anne-Laure Delatte
Download or read book The Transmission Channels of Unconventional Monetary Policy written by Anne-Laure Delatte and published by . This book was released on 2019 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a bank-firm level credit registry combined with firm-level balance sheet data we establish the presence of heterogeneity in the effects of unconventional monetary policy transmission. We examine the consequences of a loosening in the collateral eligibility requirement for credit refinancing in France. The policy was designed to affect bank lending positively. We expect a linear increase in lending and an additional increase in loans to firms with newly acceptable rating. We find a large heterogeneity of the monetary policy transmission including the unexpected reduction of lending by the banks benefiting the most from the policy. These are small, risk-averse banks whose foremost concern after the recession was to strengthen their balance sheets. Banks least affected by the policy respond with a reduction in credit to low risk borrowers in reaction to the change in the market structure. Last we document heterogenous effects of the policy on firms depending on their size.
Book Synopsis Monetary Policy Transmission in the Euro Area by : Ignazio Angeloni
Download or read book Monetary Policy Transmission in the Euro Area written by Ignazio Angeloni and published by Cambridge University Press. This book was released on 2003-12-04 with total page 522 pages. Available in PDF, EPUB and Kindle. Book excerpt: A systematic analysis of the impact of European Central Bank monetary policy on Eurozone national economies, first published in 2003.
Book Synopsis Firm-Level Data and Monetary Policy: The Case of a Middle Income Country by : Lahcen Bounader
Download or read book Firm-Level Data and Monetary Policy: The Case of a Middle Income Country written by Lahcen Bounader and published by International Monetary Fund. This book was released on 2019-11-01 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: We test the existence of the balance sheet channel of monetary policy in a middle-income country. Firm-level data scarcity and quality, in such a context, make the identification of this channel a steep challenge. To circumvent this challenge, we use panel instrumental variables estimation with measurement error to analyze the financial statements of 58 500 Moroccan firms over the period 2010-2016. Our analysis confirms the existence of this channel. It shows that monetary policy has a significant impact on small and medium enterprises’ access to banks’ financing, and that firm-specific variables are key determinants of firms’ financing decisions.
Book Synopsis Negative Monetary Policy Rates and Portfolio Rebalancing: Evidence from Credit Register Data by : Margherita Bottero
Download or read book Negative Monetary Policy Rates and Portfolio Rebalancing: Evidence from Credit Register Data written by Margherita Bottero and published by International Monetary Fund. This book was released on 2019-02-28 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study negative interest rate policy (NIRP) exploiting ECB's NIRP introduction and administrative data from Italy, severely hit by the Eurozone crisis. NIRP has expansionary effects on credit supply-- -and hence the real economy---through a portfolio rebalancing channel. NIRP affects banks with higher ex-ante net short-term interbank positions or, more broadly, more liquid balance-sheets, not with higher retail deposits. NIRP-affected banks rebalance their portfolios from liquid assets to credit—especially to riskier and smaller firms—and cut loan rates, inducing sizable real effects. By shifting the entire yield curve downwards, NIRP differs from rate cuts just above the ZLB.
Book Synopsis Is Bank Debt Special for the Transmission of Monetary Policy? by : Filippo Ippolito
Download or read book Is Bank Debt Special for the Transmission of Monetary Policy? written by Filippo Ippolito and published by . This book was released on 2013 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: We combine existing balance sheet and stock market data with two new datasets to study whether, how much, and why bank lending to firms matters for the transmission of monetary policy. The first new dataset enables us to quantify the bank dependence of firms precisely, as the ratio of bank debt to total assets. We show that a two standard deviation increase in the bank dependence of a firm makes its stock price about 25% more responsive to monetary policy shocks. We explore the channels through which this effect occurs, and find that the stock prices of bank-dependent firms that borrow from financially weaker banks display a stronger sensitivity to monetary policy shocks. This finding is consistent with the bank lending channel, a theory according to which the strength of bank balance sheets matters for monetary policy transmission. We construct a new database of hedging activities and show that the stock prices of bank-dependent firms that hedge against interest rate risk display a lower sensitivity to monetary policy shocks. This finding is consistent with an interest rate pass-through channel that operates via the direct transmission of policy rates to lending rates associated with the widespread use of floating-rates in bank loans and credit line agreements.
Book Synopsis U.S. Monetary Policy Shock Spillovers: Evidence from Firm-Level Data by : Ms. Elif C Arbatli Saxegaard
Download or read book U.S. Monetary Policy Shock Spillovers: Evidence from Firm-Level Data written by Ms. Elif C Arbatli Saxegaard and published by International Monetary Fund. This book was released on 2022-09-16 with total page 69 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine three main channels through which U.S. monetary policy shocks affect firm investment in foreign countries: (1) the balance sheet channel; (2) the financial channel of the exchange rate; and (3) the trade channel. For this purpose, we use quarterly firm-level data for 63 advanced economies (AEs) and emerging market and developing economies (EMDEs) over 1996-2016. Our results suggest an important and independent role for all three key channels. U.S. monetary policy shocks have larger effects on investment for firms that are more leveraged (balance sheet channel), for firms that have a higher share of debt in foreign currency (financial channel of the exchange rate), and for firms that operate in sectors with higher export dependence (trade channel). Back-of-the-envelope calculations suggest that the balance sheet channel is the most important channel of transmission of U.S. monetary policy shocks on aggregate firm investment.
Book Synopsis Heterogeneous Bank Lending Responses to Monetary Policy by : Mr.John C Bluedorn
Download or read book Heterogeneous Bank Lending Responses to Monetary Policy written by Mr.John C Bluedorn and published by International Monetary Fund. This book was released on 2013-05-22 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: We present new evidence on how heterogeneity in banks interacts with monetary policy changes to impact bank lending. Using an exogenous policy measure identified from narratives on FOMC intentions and real-time economic forecasts, we find much greater heterogeneity in U.S. bank lending responses than that found in previous research based on realized federal funds rate changes. Our findings suggest that studies using realized monetary policy changes confound the monetary policy’s effects with those of changes in expected macrofundamentals. We also extend Romer and Romer (2004)’s identification scheme, and expand the time and balance sheet coverage of the U.S. banking sample.
Book Synopsis Stock Market's Assessment of Monetary Policy Transmission by : Refet S. Gurkaynak
Download or read book Stock Market's Assessment of Monetary Policy Transmission written by Refet S. Gurkaynak and published by . This book was released on 2019 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show that firm liability structure and associated cash flow matter for firm behavior, and that financial market participants price stocks accordingly. Looking at firm level stock price changes around monetary policy announcements, we find that firms that have more cash flow exposure see their stock prices affected more. The stock price reaction depends on the maturity and type of debt issued by the firm, and the forward guidance provided by the Fed. This effect has remained intact during the ZLB period. Importantly, we show that the effect is not a rule of thumb behavior outcome and that the marginal stock market participant actually studies and reacts to the liability structure of firm balance sheets. The cash flow exposure at the time of monetary policy actions predicts future net worth, investment, and assets, verifying the stock pricing decision and also providing evidence of cash flow effects on firms' real behavior. The results hold for S&P500 firms that are usually thought of not being subject to tight financial constraints.
Book Synopsis Global Banks and International Shock Transmission by : Nicola Cetorelli
Download or read book Global Banks and International Shock Transmission written by Nicola Cetorelli and published by DIANE Publishing. This book was released on 2010-11 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: Global banks played a significant role in transmitting the 2007-09 financial crisis to emerging-market (EM) economies. The authors examine adverse liquidity shocks on main developed-country banking systems and their relationships to EM across Europe, Asia, and Latin Amer., isolating loan supply from loan demand effects. Loan supply in EM across Europe, Asia, and Latin Amer. was affected significantly through three separate channels: (1) a contraction in direct, cross-border lending by foreign banks; (2) a contraction in local lending by foreign banks¿ affiliates in EM; and (3) a contraction in loan supply by domestic banks, resulting from the funding shock to their balance sheets induced by the decline in interbank, cross-border lending. Charts and tables.
Book Synopsis Changing Nature of Financial Intermediation and the Financial Crisis of 2007-09 by : Tobias Adrian
Download or read book Changing Nature of Financial Intermediation and the Financial Crisis of 2007-09 written by Tobias Adrian and published by DIANE Publishing. This book was released on 2011 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is a print on demand edition of a hard to find publication. The financial crisis of 2007-09 highlighted the changing role of financial institutions and the growing importance of the ¿shadow banking system,¿ which grew out of the securitization of assets and the integration of banking with capital market developments. In a market-based financial system, banking and capital market developments are inseparable, and funding conditions are tied closely to fluctuations in the leverage of market-based financial intermediaries. This report describes the changing nature of financial intermediation in the market-based financial system, charts the course of the recent financial crisis, and outlines the policy responses that have been implemented by the Fed. Reserve and other central banks. Charts and tables.
Book Synopsis The Monetary Transmission Mechanism by :
Download or read book The Monetary Transmission Mechanism written by and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Banking Structure and Monetary Policy Transmission by : Alex Hsu
Download or read book Banking Structure and Monetary Policy Transmission written by Alex Hsu and published by . This book was released on 2018 with total page 81 pages. Available in PDF, EPUB and Kindle. Book excerpt: We find a significant increase in sensitivities of firm-level investment to monetary policy changes after interstate banking deregulation (IBD) in the U.S. The sensitivities are on average 2% more negative in the years following IBD compared to prior. The intensification of monetary policy potency is through the balance sheet channel of transmission. The result is driven entirely by firms with low external financing premium, characterized by low book leverage and high book-to-market ratio. Consistent with our empirical finding, when the financial accelerator is turned on in a calibrated DSGE model, the investment response to monetary policy shocks is amplified.
Book Synopsis Collateral Heterogeneity and Monetary Policy Transmission by : Cecilia R. Caglio
Download or read book Collateral Heterogeneity and Monetary Policy Transmission written by Cecilia R. Caglio and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using matched firm-bank level administrative data for the U.S., we document new facts on heterogeneity in firms' financing conditions and quantify its effects on monetary policy transmission. Most private firms in the U.S. are small-medium-size-enterprises (SMEs), whose entire balance sheet debt comes from banks and is collateralized mostly with earnings and intangibles, i.e., their enterprise value. Highly leveraged SMEs' respond to monetary expansions more by increasing their credit demand. They borrow more at lower spreads by pledging earnings-based collateral, whose value increases with monetary expansions. Our results link the bank lending and firm investment channels of monetary policy and show that the impact of policy on investment is stronger in an environment with a large number of small firms, whose borrowing depends on earnings-based constraints.
Book Synopsis A Survey of Non-financial Sector Balance Sheets in Industrialised Countries by : J. T. Kneeshaw
Download or read book A Survey of Non-financial Sector Balance Sheets in Industrialised Countries written by J. T. Kneeshaw and published by . This book was released on 1995 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Understanding Financial Accounts by : OECD
Download or read book Understanding Financial Accounts written by OECD and published by OECD Publishing. This book was released on 2017-11-06 with total page 424 pages. Available in PDF, EPUB and Kindle. Book excerpt: Understanding Financial Accounts seeks to show how a range of questions on financial developments can be answered with the framework of financial accounts and balance sheets, by providing non-technical explanations illustrated with practical examples.
