Dr. Thomas Winberry, Chicago Booth
This event is part of the Economics Seminar Series series.
Location:
Gerri C. LeBow Hall722
3220 Market Street
Philadelphia, PA 19104
This event is also being delivered online, participants must register to receive the link.
Registration Option:
Dr. Winberry will present “Financial Heterogeneity and the investment Channel of Monetary Policy”
Abstract We study the role of heterogeneity in firms’ financial positions in determining the investment channel of monetary policy. Empirically, we show that firms with low leverage or high credit ratings are the most responsive to monetary policy shocks. We develop a heterogeneous firm New Keynesian model with default risk to interpret these facts and study their aggregate implications. In the model, firms with high default risk are less responsive to monetary shocks because their marginal cost of external finance is high. The aggregate effect of monetary policy therefore depends on the distribution of default risk across firms.