Causal effects of the Fed's large-scale asset purchases on firms' capital structure
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Authors
Nocera, A.
Pesaran, M. H.
Publication Date
2022-04-05Series
Cambridge Working Papers in Economics
Publisher
Faculty of Economics, University of Cambridge
Type
Working Paper
Metadata
Show full item recordCitation
Nocera, A., & Pesaran, M. H. (2022). Causal effects of the Fed's large-scale asset purchases on firms' capital structure. https://doi.org/10.17863/CAM.83971
Abstract
This paper investigates the short- and long-term impacts of the Federal Reserve’s large-scale asset purchases (LSAPs) on the capital structure of U.S. non-financial firms. To isolate the effects of LSAPs from the impact of concurrent macroeconomic conditions, we exploit cross-industry variations in the ability of firms therein to raise external funds without exhausting their debt capacity. We show that firms’ responses to LSAPs strongly depend on the financing decisions of other peers in the same industry. The higher the proportion of firms without high debt burdens in an industry, the stronger the response of firms within the industry to the Fed’s asset purchases. Overall, our results show that LSAPs facilitated firms’ access to debt financing and that the impacts of LSAPs on firms’ capital structure are likely to be long-lasting.
Keywords
Capital structure, identification, interactive effects, leverage, quantitative easing, unconventional monetary policy
Identifiers
CWPE2224
This record's DOI: https://doi.org/10.17863/CAM.83971
This record's URL: https://www.repository.cam.ac.uk/handle/1810/336550
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