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Bottleneck effects of monetary policy

Boissay, Frederic; Garcia-Appendini, Emilia; Ongena, Steven (2022). Bottleneck effects of monetary policy. London: VoxEU, CEPR Policy Portal.

Abstract

Is monetary policy transmitted through markets for intermediate goods? Analyzing unique US data on corporate linkages, we document that the financial health of downstream and upstream firms plays a key role in the transmission of monetary policy. Our estimates suggest that conventional contractionary changes in monetary conditions lead to reductions in both the demand and the supply of financially constrained firms downstream and upstream. These reductions create bottlenecks inducing the linked firms "in the middle" to curtail their own activities. Overall these "bottleneck effects" coming from the changes in demand and supply at financially constrained business partners are estimated to have a larger impact on a firm's operations than the firm's own financial conditions.

Additional indexing

Item Type:Scientific Publication in Electronic Form
Communities & Collections:03 Faculty of Economics > Department of Finance
Dewey Decimal Classification:330 Economics
Scope:Discipline-based scholarship (basic research)
Language:English
Date:2022
Deposited On:09 Feb 2023 11:21
Last Modified:06 Mar 2024 14:38
Publisher:VoxEU, CEPR Policy Portal
OA Status:Closed
Free access at:Official URL. An embargo period may apply.
Official URL:https://cepr.org/publications/dp16465
Other Identification Number:merlin-id:23230
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