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Ripple effects of monetary policy

Boissay, Frédéric; Garcia-Appendini, Emilia; Ongena, Steven (2021). Ripple effects of monetary policy. BIS Working Paper 957, Bank for International Settlements.

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.

Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Finance
Dewey Decimal Classification:330 Economics
JEL Classification:E52, G32
Uncontrolled Keywords:Monetary policy transmission, supply chain, aggregate demand, cost channel
Scope:Discipline-based scholarship (basic research)
Language:English
Date:1 August 2021
Deposited On:07 Sep 2023 11:23
Last Modified:27 May 2024 15:23
Series Name:BIS Working Paper
Number of Pages:58
ISSN:1020-0959
OA Status:Closed
Official URL:https://www.bis.org/publ/work957.htm
Other Identification Number:merlin-id:23231

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