This paper compares the effects of conventional monetary policy on real borrowing costs with those of the unconventional measures employed after the target federal funds rate hit the zero lower bound (ZLB). For the ZLB period, we identify two policy surprises: changes in the 2-year Treasury...

To identify disruptions in credit markets, research on the role of asset prices in economic fluctuations has focused on the information content of various corporate credit spreads. We re-examine this evidence using a broad array of credit spreads constructed directly from the secondayr bond...

The canonical framework used to price risky debt implies that the payoff structure of levered equity resembles the payoff of a call option, while the bondholders face a payoff structure that is equivalent to that of an investor writing a put option. As a result, an increase in the payoff...

We develop an accounting methodology to map observed differences in borrowing costs into measures of aggregate resource misallocation that may plausibly be attributed to financial market imperfections. Using a log-normal approximation we show that this resource misallocation may be inferred from...

In this paper, we investigate the effect of financial conditions on price-setting behavior during the 2008-2009 financial crisis. Using confidential, individual producer prices from the Bureau of Labor Statistics, we match these prices to Compustat firm-level data and compare pricing behavior...

There is a consensus about the increasing exposure to disruptions in the financial system and economic uncertainty over the recent years. Despite their different implications for policy, discriminating empirically between these two sources of economic fluctuations is not an easy task because...

Using confidential product-level price data underlying the U.S. Producer Price Index (PPI), this paper analyzes the effect of changes in firms' financial conditions on their price-setting behavior during the "Great Recession" that surrounds the financial crisis. The evidence indicates that...

To identify disruptions in credit markets, research on the role of asset prices in economic fluctuations has focused on the information content of various corporate credit spreads. We re-examine this evidence using a broad array of credit spreads constructed directly from the secondary bond...

We study the effect of variation in interest rates on investment spending, employing a large panel data set that links yields on outstanding corporate bonds to the issuer income and balance sheet statements. The bond price data—based on trades in the secondary market—enable us to construct a...

The empirical difficulties associated with estimating the effects of changes in interest rates and corporate tax policy on business fixed investment are often blamed on a lack of identification. In this paper, we study the effect of variation in interest rates on investment spending, employing a...