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Publication Date:
January 18, 2017
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Summary:
I document that floating-rate loans from banks (particularly important for bank-dependent firms) drive most variation in firms' exposure to interest rates. I argue that banks lend to firms at floating rates because they themselves have floating-rate liabilities, supporting this with three key findings. Banks with more floating-rate liabilities, first, make more floating-rate loans, second, hold more floating-rate securities, and third, quote lower prices for floating-rate loans. My results establish an important link between intermediaries' funding structure and the types of contracts used by non-financial firms. They also highlight a role for banks in the balance-sheet channel of monetary policy.
IMF - International Monetary Fund published this content on 18 January 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 19 January 2017 23:32:03 UTC.
Original documenthttp://www.imf.org/en/Publications/WP/Issues/2017/01/18/Why-Do-Bank-Dependent-Firms-Bear-Interest-Rate-Risk-44550
Public permalinkhttp://www.publicnow.com/view/BDE0214417CF33864355B91DB8E0105347FA980C
