A Capital Structure Channel of Monetary Policy

Benjamin Grosse-Rueschkamp, Sascha Steffen, Daniel Streitz

Research output: Contribution to conferencePaperResearchpeer-review

Abstract

We study the transmission channels from central banks’ quantitative easing programs via the banking sector when central banks start purchasing corporate bonds. We find evidence consistent with a “capital structure channel” of monetary policy. The announcement of central bank purchases reduces the bond yields of firms whose bonds are eligible for central bank purchases. These firms substitute bank term loans with bond debt, thereby relaxing banks’ lending constraints: banks with low Tier-1 ratios and high non-performing loans increase lending to private (and profitable) firms, which experience a growth in capital expenditures and sales. The credit reallocation increases banks’ risk-taking in corporate credit.
Original languageEnglish
Publication date18 Sep 2018
Number of pages66
DOIs
Publication statusPublished - 18 Sep 2018
Event25th Annual Meeting of the German Finance Association. DGF 2018 - Universität Trier, Trier, Germany
Duration: 21 Sep 201822 Sep 2018
Conference number: 25
https://www.uni-trier.de/index.php?id=65393

Conference

Conference25th Annual Meeting of the German Finance Association. DGF 2018
Number25
LocationUniversität Trier
CountryGermany
CityTrier
Period21/09/201822/09/2018
Internet address

Keywords

  • Debt capital structure
  • Bond debt
  • Unconventional monetary policy
  • CSPP
  • Real effects

Cite this

Grosse-Rueschkamp, B., Steffen, S., & Streitz, D. (2018). A Capital Structure Channel of Monetary Policy. Paper presented at 25th Annual Meeting of the German Finance Association. DGF 2018, Trier, Germany. https://doi.org/10.2139/ssrn.2988158
Grosse-Rueschkamp, Benjamin ; Steffen, Sascha ; Streitz, Daniel. / A Capital Structure Channel of Monetary Policy. Paper presented at 25th Annual Meeting of the German Finance Association. DGF 2018, Trier, Germany.66 p.
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Grosse-Rueschkamp, B, Steffen, S & Streitz, D 2018, 'A Capital Structure Channel of Monetary Policy' Paper presented at, Trier, Germany, 21/09/2018 - 22/09/2018, . https://doi.org/10.2139/ssrn.2988158

A Capital Structure Channel of Monetary Policy. / Grosse-Rueschkamp, Benjamin; Steffen, Sascha; Streitz, Daniel.

2018. Paper presented at 25th Annual Meeting of the German Finance Association. DGF 2018, Trier, Germany.

Research output: Contribution to conferencePaperResearchpeer-review

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KW - Real effects

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Grosse-Rueschkamp B, Steffen S, Streitz D. A Capital Structure Channel of Monetary Policy. 2018. Paper presented at 25th Annual Meeting of the German Finance Association. DGF 2018, Trier, Germany. https://doi.org/10.2139/ssrn.2988158