A Capital Structure Channel of Monetary Policy

Benjamin Grosse-Rueschkamp, Sascha Steffen, Daniel Streitz

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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 nonperforming loans increase lending to private (and profitable) firms, which experience a growth in investment. The credit reallocation increases banks’ risk-taking in corporate credit.
Original languageEnglish
JournalJournal of Financial Economics
Issue number2
Pages (from-to)357-378
Number of pages22
Publication statusPublished - Aug 2019


  • Debt capital structure
  • Bond debt
  • Unconventional monetary policy
  • Quantitative easing
  • Real effects

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