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Employment and the collateral channel of monetary policy

Bahaj, Saleem Abubakr, Foulis, Angus, Pinter, Gabor and Surico, Paolo (2018) Employment and the collateral channel of monetary policy. CFM discussion paper series (CFM-DP2018-32). Centre For Macroeconomics, London School of Economics and Political Science, London, UK.

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This paper uses a detailed firm-level dataset to show that monetary policy propagates via asset prices through corporate debt collateralised on real estate. Our research design exploits the fact that many small and medium sized firms use the homes of the firm’s directors as a key source of collateral, and directors’ homes are typically not in the same region as their firm. This spatial separation of firms and firms’ collateral allows us to separate the propagation of monetary policy via fluctuations in collateral values from that via demand channels. We find that younger and more levered firms who have collateral values that are particularly sensitive to monetary policy show the largest employment response to monetary policy. The collateral channel explains a sizeable share of the aggregate employment response.

Item Type: Monograph (Discussion Paper)
Official URL:
Additional Information: © 2018 The Authors
Divisions: Economics
Subjects: H Social Sciences > HB Economic Theory
Date Deposited: 03 Jun 2019 23:25
Last Modified: 26 Jan 2021 00:19

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