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Corporate Debt Maturity, Repayment Structure and Monetary Policy Transmission

Author

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  • Hatice Gokce Karasoy Can

Abstract

Taking a theoretical stand, this paper studies the role of corporate debt maturity and its repayment structure in monetary policy transmission mechanism. It builds on a stylized New Keynesian dynamic stochastic general equilibrium (NK-DSGE) model and discusses the transmission under various corporate debt structures. The results show that a given contractionary monetary policy is less effective in terms of stabilizing inflation when debt contracts are written on a floating rate basis. Moreover, increased corporate debt burden amplifies the real effects of the credit channel. Extending the maturity of floating rate debt aggravates these effects and makes firms even more vulnerable to adverse shocks.

Suggested Citation

  • Hatice Gokce Karasoy Can, 2020. "Corporate Debt Maturity, Repayment Structure and Monetary Policy Transmission," Working Papers 2009, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    • Handle: RePEc:tcb:wpaper:2009
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    File URL: https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Research/Working+Paperss/2020/20-09
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    More about this item

    Keywords

    Floating rate debt; Debt maturity; Monetary policy transmission; Credit channel;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • 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
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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