How do quantitative easing and tightening affect firms?

We study how firms respond to quantitative easing (QE) and quantitative tightening (QT) policies of the Federal Reserve. We construct a novel time series of maturity-specific central bank balance sheet shocks covering multiple QE and QT programs. In response to central bank purchases of government bonds, we find that, on average, firms adjust their debt maturity structure, reduce interest expenses and accumulate cash, while their total debt, capital and employment remain largely unchanged. The impact of these policies differs depending on the targeted maturity segment and the credit quality of firms. Policy transmission primarily runs via bond markets. There are positive spillovers to high-rated non-US firms. Our findings can inform the design of balance sheet policies.