Credit: Empirical Macroeconomic Implications
Friday, Jan. 4, 2019 8:00 AM - 10:00 AM
- Chair: Farzad Saidi, Stockholm School of Economics
The Credit Channel of Fiscal Policy Transmission
AbstractWe propose and test a new channel through which ﬁscal policy changes can aﬀect the supply of intermediated credit and the real economy. Banks that have greater exposure to ﬁrms expected to repatriate a signiﬁcant amount of foreign income as a result of a 2004-2005 U.S. tax holiday subsequently increase lending to other, purely domestic ﬁrms during the period of the tax holiday, leading to higher investment at these ﬁrms. Our results complement the existing literature on the credit channel of monetary policy transmission and highlight an important indirect spillover eﬀect of ﬁscal policy changes on credit-constrained ﬁrms.
The Effects of Credit Supply on Wage Inequality between and within Firms
AbstractIn this paper, we study the effect of a credit supply shock on the distribution of wages within and between firms. We construct a novel dataset combining administrative linked employer-employee data with information on firms' preexisting bank relationships in the credit market. We use the introduction of negative monetary policy rates in the euro area as a source of variation in banks' credit supply to firms in Germany. We find that this credit supply shock leads to higher within-firm wage inequality at more affected employers. At the same time, we find a reduction in between-firm wage inequality due to relatively higher average wages among initially lower-paying employers. Our results suggest that monetary policy can have important distributional consequences through affecting credit supply and firm pay heterogeneity.
- E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy
- G2 - Financial Institutions and Services