BoE paper finds heterogeneous policy transmission to firms
Authors say financial frictions “crucial” to understanding monetary policy transmission
New research finds financial frictions, particularly differences in leverage between firms, play a key role in the transmission of monetary policy.
The Bank of England staff working paper, by Gareth Anderson and Ambrogio Cesa-Bianchi, draws on new data on corporate bond spreads. The authors say this helps them overcome two shortcomings of previous literature: the fact that firm-level data comes out less frequently than monetary policy decisions; and the confusion caused by “non-monetary” news
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