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The Transmission of Monetary Policy through Bank Lending : The Floating Rate Channel *
| Content Provider | Semantic Scholar |
|---|---|
| Author | Ippolito, Filippo Ozdagli, Ali K. Pérez, Alberto Márquez |
| Copyright Year | 2015 |
| Abstract | We find that outstanding bank loans are a vital component of the firm balance sheet channel of monetary policy transmission because, unlike other debt, most bank loans have floating interest rates that are mechanically tied to monetary policy rates. Firms that use more bank debt and do not hedge it display a stronger sensitivity of their stock price, cash holdings, sales, inventory and fixed capital investment to monetary policy. The effect is significantly more powerful for financially constrained firms, consistent with the idea that changes to floating rates induced by monetary policy have an impact on the liquidity and balance sheet strength of these firms. This effect disappears when policy rates are at the zero lower bound, a finding that further supports the floating rate mechanism and reveals a new limitation of unconventional monetary policy. This floating rate channel is potentially as important as the widely studied bank lending channel that works through new loans. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | https://www.aeaweb.org/conference/2016/retrieve.php?pdfid=502 |
| Alternate Webpage(s) | https://www.federalreserve.gov/econres/feds/files/2017026pap.pdf |
| Language | English |
| Access Restriction | Open |
| Subject Keyword | Arabic numeral 0 Color balance Money Technical debt |
| Content Type | Text |
| Resource Type | Article |
