IDEAS home Printed from https://ideas.repec.org/a/eee/moneco/v143y2024ics0304393223001241.html
   My bibliography  Save this article

How does the fed affect corporate credit costs? Default risk, creditor segmentation and the post-FOMC drift

Author

Listed:
  • Walz, Stefan

Abstract

Surprise changes in monetary policy rates have a causal impact on credit risk measures, which display a significant post-FOMC drift. I employ a tight identification strategy to decompose the influence of firm-specific and creditor-specific factors across horizons. Firms with narrower income gaps and lower Tobin’s Q ratios exhibit heightened sensitivity at both short and long horizons. Bonds predominantly held by bond funds demonstrate only temporarily more sensitivity, indicating that credit market segmentation fails to account for the observed drift. Aggregate broker dealer capital scarcity is linked to an amplified response in the drift component. A large portion of the drift remains unexplained, revealing the limitations of cross-sectional characteristics in explaining the transmission mechanism.

Suggested Citation

  • Walz, Stefan, 2024. "How does the fed affect corporate credit costs? Default risk, creditor segmentation and the post-FOMC drift," Journal of Monetary Economics, Elsevier, vol. 143(C).
    • Handle: RePEc:eee:moneco:v:143:y:2024:i:c:s0304393223001241
    DOI: 10.1016/j.jmoneco.2023.10.008
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0304393223001241
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jmoneco.2023.10.008?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Monetary policy; Bond markets; Financial intermediation;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

    Statistics

    Access and download statistics

    Corrections

    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:eee:moneco:v:143:y:2024:i:c:s0304393223001241. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505566 .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.