{"title":"How does the fed affect corporate credit costs? Default risk, creditor segmentation and the post-FOMC drift","authors":"Stefan Walz","doi":"10.1016/j.jmoneco.2023.10.008","DOIUrl":null,"url":null,"abstract":"<div><p>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.</p></div>","PeriodicalId":48407,"journal":{"name":"Journal of Monetary Economics","volume":null,"pages":null},"PeriodicalIF":4.3000,"publicationDate":"2024-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Monetary Economics","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0304393223001241","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
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.
期刊介绍：
The profession has witnessed over the past twenty years a remarkable expansion of research activities bearing on problems in the broader field of monetary economics. The strong interest in monetary analysis has been increasingly matched in recent years by the growing attention to the working and structure of financial institutions. The role of various institutional arrangements, the consequences of specific changes in banking structure and the welfare aspects of structural policies have attracted an increasing interest in the profession. There has also been a growing attention to the operation of credit markets and to various aspects in the behavior of rates of return on assets. The Journal of Monetary Economics provides a specialized forum for the publication of this research.
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