Credit spreads rise after a monetary policy tightening, yet spread reactions are heterogeneous across firms. Exploiting information from a panel of corporate bonds matched with balance sheet data for U.S. non-financial firms, we document that firms with high leverage experience a more pronounced...

This paper develops and estimates a monetary DSGE model with adverse selection in credit markets. The model features a new shock, referred as a lemons shock, which changes the riskiness of debtors in the mean-preserving spread sense with each debtor's riskiness unknown to a creditor. The...

We analyze the effect of monetary policy on yield spreads between corporate bonds with different credit ratings over the business cycle. We use futures contracts to distinguish between expected and unexpected changes in the Fed funds target rate and several indicators to distinguish between...