Following the sovereign debt crisis, bank interest rates charged to non-financial firms declined sharply in the euro area. This work explores the firms' balance-sheet channel hypothesis on the role played by firms' characteristics and risk profile in the transmission of monetary policy. Using a...

We analyse the impact of macroeconomic and monetary policy shocks on corporate credit risk as measured by firms' probabilities of default (PDs) for the four largest euro area countries. We estimate the impact of shocks on one-year PDs using local projections (LP). For the period 2014-19, we find...