Search Results

Showing results 1 to 3 of approximately 3.

(refine search)
SORT BY: PREVIOUS / NEXT
Author:Banerjee, Ryan N. 

Discussion Paper
The Making of Fallen Angels—and What QE and Credit Rating Agencies Have to Do with It

Riskier firms typically borrow at higher rates than safer firms because investors require compensation for taking on more risk. However, since 2009 this relationship has been turned on its head in the massive BBB corporate bond market, with risky BBB-rated firms borrowing at lower rates than their safer BBB-rated peers. The resulting risk materialized in an unprecedented wave of “fallen angels” (or firms downgraded below the BBB investment-grade threshold) at the onset of the COVID-19 pandemic. In this post, based on a related Staff Report, we claim that this anomaly has been driven by a ...
Liberty Street Economics , Paper 20220216a

Report
Financial frictions, real estate collateral, and small firm activity in Europe

We observe significant heterogeneity in the correlation between changes in house prices and the growth of small firms across certain countries in Europe. We find that, overall, the correlation is far greater in Southern Europe than in Northern Europe. Using a simple model, we show that this heterogeneity may relate to financial frictions in a country. We confirm the model?s propositions in a number of empirical analyses for the following countries in Northern and Southern Europe: the United Kingdom, Norway, France, Italy, Spain, and Portugal. Small firms in countries with higher financial ...
Staff Reports , Paper 868

Report
Exorbitant Privilege? Quantitative Easing and the Bond Market Subsidy of Prospective Fallen Angels

We document capital misallocation in the U.S. investment-grade (IG) corporate bond market, driven by quantitative easing (QE). Prospective fallen angels—risky firms just above the IG rating cutoff—enjoyed subsidized bond financing since 2009, especially when the scale of QE purchases peaked and from IGfocused investors that held more securities purchased in QE programs. The benefitting firms used this privilege to fund risky acquisitions and increase market share, exploiting the sluggish adjustment of credit ratings in downgrading after M&A and adversely affecting competitors' employment ...
Staff Reports , Paper 1004

FILTER BY year

FILTER BY Bank

FILTER BY Series

FILTER BY Content Type

FILTER BY Author

Acharya, Viral V. 2 items

Crosignani, Matteo 2 items

Eisert, Tim 2 items

Spigt, Renée 2 items

Blickle, Kristian S. 1 items

show more (1)

FILTER BY Jel Classification

E31 1 items

E44 1 items

G2 1 items

G21 1 items

G3 1 items

G30 1 items

show more (5)

PREVIOUS / NEXT