Monetary policy and corporate bond yield spreads
AbstractFirm characteristics, economic conditions and policy regimes are the key determinants that most researchers have used to explain corporate bond yield spreads. In this article, we examine whether monetary policy shocks are also important determinants given their ability to affect default risk, risk aversion and liquidity premiums. Using a Vector Autoregression (VAR) with long-run monetary neutrality, we find that monetary policy shocks do, in fact, account for a large portion of the variation in corporate bond yield spreads.
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Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal Applied Economics Letters.
Volume (Year): 17 (2010)
Issue (Month): 12 ()
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Web page: http://www.tandf.co.uk/journals/routledge/13504851.html
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- Paradiso, Antonio & Rao, B. Bhaskara, 2011. "The effects of Minsky moment and stock prices on the US Taylor Rule," MPRA Paper 27840, University Library of Munich, Germany.
- Badye Essid & Tolga Cenesizoglu, 2010. "The Effect of Monetary Policy on Credit Spreads," 2010 Meeting Papers 1139, Society for Economic Dynamics.
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