The Bond Lending Channel of Monetary Policy

60 Pages Posted: 8 May 2020

See all articles by Olivier Darmouni

Olivier Darmouni

Columbia University - Columbia Business School

Oliver Giesecke

affiliation not provided to SSRN

Alexander Rodnyansky

University of Cambridge - Faculty of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2020

Abstract

The share of firms' borrowing from bond markets has been rising globally, and notably in the Eurozone. How does debt structure affect the transmission of monetary policy? We present a high-frequency framework that combines identified monetary shocks with a cross-sectional firm-level stock price reaction. Firms with more bonds are disproportionately affected by surprise monetary actions relative to other firms in the Eurozone. This finding stands in contrast to the predictions of a standard bank lending channel and points toward bond financing not being a frictionless "spare tire."

Keywords: Banking relationships, corporate bonds, Corporate Finance, financial distress, monetary policy

JEL Classification: E44, E52, G21, G23

Suggested Citation

Darmouni, Olivier and Giesecke, Oliver and Rodnyansky, Alexander, The Bond Lending Channel of Monetary Policy (April 2020). Available at SSRN: https://ssrn.com/abstract=3594291

Olivier Darmouni (Contact Author)

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Oliver Giesecke

affiliation not provided to SSRN

Alexander Rodnyansky

University of Cambridge - Faculty of Economics ( email )

Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom

HOME PAGE: http://www.arodnyansky.com

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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