Enterprises' financing structure and their response to monetary policy stimuli : an analysis based on the Deutsche Bundesbank's corporate balance sheet statistics

The traditional monetary policy transmission mechanism is based on the fact that, in the wake of a restrictive monetary policy stance, the interest rate rises and that therefore interest-rate-related variables, such as corporate asset formation, dec1ine or increase less sharply than at the given interest rate. For some years now economists -especiaIly in the Anglo-Saxon countries -have been discussing the credit channel approach, which embraces the credit supply as weIl as the interest rate channeL A crucial factor in this context is that information between the lender and the borrower is asymmetric. This primarily affects small enterprises, whose creditworthiness is, as a rule, not as good as that oflarge firms and which are heavily reliant on bank credit. The credit channel theory states that, for small enterprises, a stricter monetary policy stance results in a higher cost of borrowed funds than for larger enterprises or even in credit rationing. The result is that this group of enterprises cuts its asset formation particularly sharply ...