Causal Effects of the Fed's Large-Scale Asset Purchases on Firms' Capital Structure

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 9695

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Financial Markets and the Macroeconomy ; Monetary Policy ; Central Banks and Their Policies
• Subject: capital structure ; identification ; interactive effects ; leverage ; quantitative easing ; unconventional monetary policy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Nocera, Andrea ; Pesaran, M. Hashem
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/260825
• Last update: 10.03.2025, 11:44 AM CET