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Working Paper
Corporate Debt Maturity Matters for Monetary Policy
We provide novel empirical evidence that firms’ investment is more responsive to monetary policy when a higher fraction of their debt matures. In a heterogeneous firm New Keynesian model with financial frictions and endogenous debt maturity, two channels explain this finding: (1.) Firms with more maturing debt have larger roll-over needs and are therefore more exposed to fluctuations in the real interest rate (roll-over risk). (2.) These firms also have higher default risk and therefore react more strongly to changes in the real burden of outstanding nominal debt (debt overhang). ...
Working Paper
Corporate Debt Maturity Matters for Monetary Policy
We provide novel empirical evidence that firms’ investment is more responsive to monetary policy when a higher fraction of their debt matures. In a heterogeneous firm New Keynesian model with financial frictions and endogenous debt maturity, two channels explain this finding: (1.) Firms with more maturing debt have larger roll-over needs and are therefore more exposed to fluctuations in the real interest rate (roll-over risk). (2.) These firms also have higher default risk and therefore react more strongly to changes in the real burden of outstanding nominal debt (debt overhang). ...
Working Paper
Do Inflation Expectations Become More Anchored During a Disinflation Episode? Evidence for Euro Area Firms
Does a successful disinflation contribute to the anchoring of inflation expectations? We provide novel survey evidence on the dynamics of euro area firms’ inflation expectations during the disinflation episode since 2022. We show that firms’ short-term inflation expectations declined steadily towards the inflation target as the disinflation progressed. However, we also document a thick tail in longer-term inflation expectations, substantial disagreement about the inflation outlook, and an increased sensitivity of longer-term inflation expectations to short-term inflation expectations. ...
Working Paper
Market Power and the Heterogeneous Pass-through of Corporate Taxes to Consumer Prices
We study the pass-through of corporate taxes into consumer prices, leveraging 1,058 municipal tax rate changes affecting 4,754 German firms. A 1 p.p. increase in a producer’s tax rate raises retail prices by 0.3% on average, consistent with imperfectly competitive producers. Product-level pass-through varies substantially, as it increases in destination-specific product and retailer-category market shares. We find little evidence linking heterogeneous passthrough to differences in retailer efficiency as reflected in relative consumer prices. Instead, our findings align with standard non-CES ...