IDEAS home Printed from
   My bibliography  Save this paper

Corporate hedging: the impact of financial derivatives on the broad credit channel of monetary policy


  • Ingo Fender


This complementary paper to Froot, Scharfstein, and Stein (1993) seeks to explore some of the corporate finance foundations of monetary economics. In particular, we investigate the impact of corporate risk management strategies on the monetary transmission mechanism. We employ a simple model of a financial accelerator (synonymously: a broad credit channel of monetary policy transmission) to argue that information asymmetries - which are at the heart of these models of the transmission mechanism - create incentives for corporate hedging programmes, that is, cash flow management. These policies, in turn, diminish the impact of monetary policy measures, which is reduced to the pure cost-of-capital effect.

Suggested Citation

  • Ingo Fender, 2000. "Corporate hedging: the impact of financial derivatives on the broad credit channel of monetary policy," BIS Working Papers 94, Bank for International Settlements.
  • Handle: RePEc:bis:biswps:94

    Download full text from publisher

    File URL:
    File Function: Full PDF document
    Download Restriction: no

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Stephen D. Oliner & Glenn D. Rudebusch, 1996. "Is there a broad credit channel for monetary policy?," Economic Review, Federal Reserve Bank of San Francisco, pages 3-13.
    2. Christina D. Romer & David Romer, 1993. "Credit channel or credit actions? an interpretation of the postwar transmission mechanism," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 71-149.
    3. R. Glenn Hubbard, 1998. "Capital-Market Imperfections and Investment," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 193-225, March.
    4. Frederic S. Mishkin, 1996. "The Channels of Monetary Transmission: Lessons for Monetary Policy," NBER Working Papers 5464, National Bureau of Economic Research, Inc.
    5. Jürgen Von Hagen & Ingo Fender, 1998. "Central Bank Policy in a More Perfect Financial System," Open Economies Review, Springer, vol. 9(1), pages 493-532, January.
    6. Nikolaus A. Siegfried, 2000. "Monetary Transmission Mechanisms in Euroland," Quantitative Macroeconomics Working Papers 20003, Hamburg University, Department of Economics.
    7. Daniel L. Thornton, 1994. "Financial innovation, deregulation and the "credit view" of monetary policy," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 31-49.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Jan Marc Berk, 2002. "Central banking and financial innovation. A survey of the modern literature," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 55(222), pages 263-297.
    2. J M. Berk, 2001. "New Economy, Old Central Banks? An overview of monetary transmission in a new economic environment," MEB Series (discontinued) 2001-5, Netherlands Central Bank, Monetary and Economic Policy Department.
    3. Marvin Barth & Eli Remolona & Philip Wooldridge, 2002. "Changes in market functioning and central bank policy: an overview of the issues," BIS Papers chapters,in: Bank for International Settlements (ed.), Market functioning and central bank policy, volume 12, pages 1-24 Bank for International Settlements.
    4. L. Arturo Bernal Ponce & Francisco Venegas Martínez, 2011. "Impacto de los productos derivados los objetivos de política monetaria: un modelo de equilibrio general," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 26(2), pages 187-216.
    5. Röthig, Andreas & Semmler, Willi & Flaschel, Peter, 2005. "Corporate Currency Hedging and Currency Crises," Darmstadt Discussion Papers in Economics 147, Darmstadt University of Technology, Department of Law and Economics.
    6. Jan Marc Berk, 2002. "Banca centrale e innovazione finanziaria. Una rassegna della letteratura recente," Moneta e Credito, Economia civile, vol. 55(220), pages 345-385.
    7. Ingo Fender, 2000. "The impact of corporate risk management on monetary policy transmission: some empirical evidence," BIS Working Papers 95, Bank for International Settlements.
    8. Andreas Pyka & Uwe Cantner & Alfred Greiner & Thomas Kuhn (ed.), 2009. "Recent Advances in Neo-Schumpeterian Economics," Books, Edward Elgar Publishing, number 12982.
    9. Chiara Oldani, 2006. "money demand and futures," ISAE Working Papers 69, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
    10. Elisa Yamazaki Tanabe & José Carlos Ramírez Sánchez, 2010. "Evaluación del impacto del mercado de derivados en los canales de transmisión de la política monetaria en México: Metodologías VAR y M-GARCH," Revista de Administración, Finanzas y Economía (Journal of Management, Finance and Economics), Tecnológico de Monterrey, Campus Ciudad de México, vol. 4(2), pages 47-78.
    11. Esteban Gómez & Diego Vásquez & Camilo Zea, 2005. "Derivative Markets' Impact On Colombian Monetary Policy," BORRADORES DE ECONOMIA 002277, BANCO DE LA REPÚBLICA.
    12. Moguillansky, Graciela, 2002. "Non-Financial Corporate Risk Management and Exchange Rate Volatility in Latin America," WIDER Working Paper Series 030, World Institute for Development Economic Research (UNU-WIDER).
    13. Chiara Oldani, 2005. "An Overview of the Literature about Derivatives," Macroeconomics 0504004, EconWPA.
    14. Jan Marc Berk, 2002. "Central banking and financial innovation. A survey of the modern literature," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 55(222), pages 263-297.

    More about this item

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bis:biswps:94. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Beslmeisl). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.