Quantitative Easing, Investment, and Safe Assets : The Corporate-Bond Lending Channel

We show that Quantitative Easing (QE) stimulates investment via a corporate-bond lending channel. Fed's large-scale asset purchases of MBS and treasuries through QE creates a vacuum of safe assets, prompting safer firms to invest more by issuing relatively "safe'' bonds. Using micro-data around QE, we find that QE increases firm-level investment by 7.4 percentage points for firms with bond market access. This growth is financed with senior bonds. We find no evidence of higher shareholders' payouts associated to QE. The robust findings are consistent with a model in which reducing the supply of government debt lowers "safe'' corporate bond yields, stimulating investment