Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/174355
Authors: 
Holtemöller, Oliver
Scherer, Jan-Christopher
Year of Publication: 
2018
Series/Report no.: 
IWH Discussion Papers 3/2018
Abstract: 
In this paper, we investigate to what extent sovereign stress and banking stress have contributed to the increase in the level and in the heterogeneity of nonfinancial firms' financing costs in the Euro area during the European debt crisis and how both have affected the monetary transmission mechanism. Employing a large firm-level data set containing two million observations, we are able to identify the effect of government bond yield spreads (sovereign stress) and the share of non-performing loans (banking stress) on firms' financing costs in a panel model by assuming that idiosyncratic shocks to individual firms are uncorrelated with country-specific variables. We find that the two sources of stress have increased firms' financing costs controlling for country and firm-specific factors. Moreover, we estimate both to have significantly impaired the monetary transmission mechanism.
Subjects: 
banking stress
firms' financing conditions
government bond yields
interest rate channel
monetary policy transmission
sovereign stress
JEL: 
E43
E44
E52
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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