Authors: Nina Boyarchenko, Leonardo Elias, and Philippe Mueller
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Staff Reports
Corporate Credit Provision
Number 895
August 2019 Revised September 2023
August 2019 Revised September 2023
JEL classification: G21, G22, G23, G32
Productive firms can access credit markets directly—by issuing corporate bonds—or in an intermediated manner—by borrowing through loans. In this paper, we study how the macroeconomic environment, including inflation, the stage of business cycle, and the stance of monetary policy, affects firms’ decisions of which debt market to access. Tighter monetary policy leads to firms borrowing more using intermediated credit, while higher inflation rates lead firms to lock in financing rates by issuing corporate bonds. Moreover, we also explore the role that heterogeneity in leverage across different types of financial institutions plays in the composition of nonfinancial firms’ financing. We show that increases in leverage in the traditional banking sector lead to a substitution from loans into bonds.
Author Disclosure Statement(s)
Nina Boyarchenko
The author declares that she has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Philippe Mueller
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
The author declares that she has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Philippe Mueller
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
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