Debt limits and monetary policy during the euro area crisis
Herrala, Risto; Turk Ariss, Rima (11.10.2022)
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Volyymi
55Numero
39Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:bof-202109131523Tiivistelmä
We study the debt limits of non-financial firms, and the influence of monetary policy via this channel during the global financial crisis in the euro area. The estimations indicate that monetary policy was initially effective in fending of a fall in the debt limits. After the monetary policy channel peaked in the vicinity of the zero-lower bound, however, the debt limits of non-financial firms contracted by almost a fifth. The tightening of the debt limits directly influenced firms that hold almost a tenth of corporate assets. The estimations furthermore provide evidence of structural shifts in credit use that contributed to the sluggish economic dynamism during the crisis period.