Template-Type: ReDIF-Paper 1.0
Author-Name: Frederic Boissay
Author-X-Name-First: Frederic
Author-X-Name-Last: Boissay
Author-Name: Emilia Garcia-Appendini
Author-X-Name-First: Emilia
Author-X-Name-Last: Garcia-Appendini
Author-Name: Steven Ongena
Author-X-Name-First: Steven
Author-X-Name-Last: Ongena
Title: Ripple effects of monetary policy
Abstract: Is conventional monetary policy transmitted through the demand for and supply of intermediate goods in an economy? Analyzing unique US data on corporate linkages, we document that downstream and upstream corporate financial health are instrumental for the transmission of monetary policy. Our estimates suggest that contractionary changes in monetary conditions lead to reductions in both the demand and the supply of all financially constrained business partners, thereby creating bottlenecks, which induce the linked firms themselves to curtail their own activities ("ripple effects"). Overall, our estimates suggest that changes in monetary conditions may have a quantitatively larger impact on firms' operations through the changes in demand and supply induced by constrained business partners than through the firms' own financial conditions.
Length: 99 pages
Creation-Date: 2021-08
File-URL: https://www.bis.org/publ/work957.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work957.htm
File-Format: text/html
Number: 957
Keywords: monetary policy transmission, supply chain, aggregate demand, cost channel
Classification-JEL: E52, G32
Handle: RePEc:bis:biswps:957