G2TT
来源类型Discussion paper
规范类型论文
来源IDDP8398
DP8398 Interest Rates and Credit Risk
Javier Suarez; Carlos González-Aguado
发表日期2011-05-20
出版年2011
语种英语
摘要This paper explores the effects of shifts in interest rates on corporate leverage and default. We develop a dynamic model in which the relationship between firms and their outside financiers is affected by a moral hazard problem and entrepreneurs' initial wealth is scarce. The endogenous link between leverage and default risk comes from the lower incentives of overindebted entrepreneurs to guarantee the survival of their firms. Firms start up with leverage typically higher than some state-contingent target leverage ratio, and adjust gradually to it through earnings retention. The dynamic response of leverage and default to cut and rises in interest rates is both asymmetric (since it is easier to adjust to a higher target leverage than to a lower one) and heterogeneously distributed across firms (since interest rates affect the burden of outstanding leverage, which differs across firms). We find that both interest rate rises and interest rate cuts increase the aggregate default rate in the short-run. Instead, higher rates produce lower default rates in the longer run since they induce lower target leverage across all firms. These results help rationalize some of the empirical evidence regarding the so-called risk-taking channel of monetary policy.
主题Financial Economics
关键词Credit risk Firm dynamics Interest rates Search for yield Short-term debt
URLhttps://cepr.org/publications/dp8398
来源智库Centre for Economic Policy Research (United Kingdom)
资源类型智库出版物
条目标识符http://119.78.100.153/handle/2XGU8XDN/537221
推荐引用方式
GB/T 7714
Javier Suarez,Carlos González-Aguado. DP8398 Interest Rates and Credit Risk. 2011.
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