Corporate Finance and Monetary Policy

Guillaume Rocheteau, Randall Wright, Cathy Zhang
2018 The American Economic Review  
This paper provides a model where entrepreneurs can ...nance random investment opportunities using trade credit, bank-issued assets, or money. They look for loans in an over-the-counter market where the terms of the contract, including loan size, interest rate, and down payment, are negotiated subject to pledgeability constraints. The model has implications for the cross-sectional distribution of corporate loan rates and sizes, interest rate pass through, and the transmission of monetary
more » ... described by either money growth or open market operations. We also consider the e¤ect of imposing di¤erent liquidity requirements on banks. JEL Classi...cation Numbers: D83, E32, E51
doi:10.1257/aer.20161048 fatcat:ukm5xuwqaveftehjngto2ywviu