A Capital Structure Channel of Monetary Policy

Benjamin Grosse-Rueschkamp, Sascha Steffen, Daniel Streitz

Research output: Contribution to conferencePaperResearchpeer-review


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
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


Conference25th Annual Meeting of the German Finance Association. DGF 2018
LocationUniversität Trier
Internet address


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

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