Crossing the Credit Channel: Credit Spreads and Firm Heterogeneity

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Author/Editor: Gareth Anderson, Ambrogio Cesa-Bianchi
Release Date: © December, 2020
ISBN : 978-1-51356-443-2
Stock #: WPIEE2020267
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Description

Credit spreads rise after a monetary policy tightening, yet spread reactions are heterogeneous across firms. Exploiting information from a panel of corporate bonds matched with balance sheet data for U.S. non-financial firms, we document that firms with high leverage experience a more pronounced increase in credit spreads than firms with low leverage. A large fraction of this increase is due to a component of credit spreads that is in excess of firms' expected default. Our results suggest that frictions in the financial intermediation sector play a crucial role in shaping the transmission mechanism of monetary policy.




More publications in this series: Working Papers


More publications by: Gareth Anderson ; Ambrogio Cesa-Bianchi