Bond Market Stimulus: Firm-Level Evidence
63 Pages Posted: 8 Oct 2020 Last revised: 31 May 2024
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Bond Market Stimulus: Firm-Level Evidence
Bond Market Stimulus: Firm-Level Evidence from 2020-21
Date Written: September 29, 2023
Abstract
How do asset purchases by central banks transmit to the real economy? Using micro-data
on corporate balance sheets, we study firm behavior after the unprecedented policy support
to corporate bond markets in 2020. As bond yields fell, firms issued bonds to accumulate
large and persistent amounts of liquid assets. The effect on real investment was generally
weak: many issuers already had access to bank liquidity and maintained equity payouts, while
others used bond funds to pay back bank debt. This evidence sheds light on how corporate
liquidity and financial heterogeneity matter for the macro-economy and the transmission of
unconventional monetary policy.
Keywords: Corporate bonds, unconventional monetary policy, corporate liquidity
JEL Classification: G23, E44, G32, E52
Suggested Citation: Suggested Citation