Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments May 16, 2022 erstellt
Description:
We document a novel channel of monetary policy transmission based on credit rating thresholds. Focusing on non-financial U.S. firms between 1990-2007, we find that firms near a rating downgrade are relatively more sensitive to monetary shocks than firms in the middle of the rating distribution. An unexpected 25 bp increase in the Fed Funds rate corresponds with approximately 2 pp lower debt growth and 1 pp lower investment for firms near a downgrade relative to middle-rated firms in the six quarters after the shock. Our results are robust to controlling for other channels of monetary policy and alternative measures of monetary shocks. To rationalize these findings, we introduce a two-period model where bankruptcy recovery rates differ across credit ratings