Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/310436 
Year of Publication: 
2024
Series/Report no.: 
Working Paper No. 2/2024
Publisher: 
Norges Bank, Oslo
Abstract: 
We show corporate real effects from Covered Interest Parity (CIP) deviations, exploiting administrative data from Norway as well as CIP deviation shocks. Banks with access to U.S. money markets strongly increase short-term USD funding in response to CIP deviations. This, in turn, leads to higher credit to non-financial firms. The increase in credit is robust to firm-time fixed effects, suggesting that it is supply-driven. Moreover, firms receiving additional credit also pay lower interest rates. These loan-level results translate into an increase in firm-level bank debt and total debt. However, corporate real effects are weaker. Despite strong effects on corporate sales (firm output), affected firms (i.e., with higher credit availability) increase their fixed assets completely driven by an increase in financial fixed assets, not through investment in real assets. Further, more affected firms pay out more dividends to shareholders.
Subjects: 
CIP deviations
bank lending channel
global banks
JEL: 
G21
F31
F65
E4
Persistent Identifier of the first edition: 
ISBN: 
978-82-8379-309-3
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper
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