Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/322320 
Year of Publication: 
2025
Series/Report no.: 
Sveriges Riksbank Working Paper Series No. 447
Publisher: 
Sveriges Riksbank, Stockholm
Abstract: 
We provide new evidence on the inflationary effects of Quantitative Easing (QE) using Swedish administrative data at the bank, firm, and product level. For identification, we rely on bank-firm lending relationships and the heterogeneous participation rates of banks in the government bond purchase program by the Swedish central bank. Our results show that the bond purchase program led to a significant and persistent increase in producer prices. Importantly, we find that the degree of financial frictions considerably influences firms' price response: low leverage firms do not change their prices, whereas high leverage firms raise their prices significantly. This divergent pricing behaviour can be rationalized by a significant increase in long-term borrowing and interest rate expenses among high leverage firms. The difference in price responses across high and low leverage firms is less pronounced for exogenous changes in the repo rate implying that the transmission mechanism of QE differs from the one of conventional interest rate policy.
Subjects: 
Quantitative easing
price dynamics
financial frictions
JEL: 
E31
E51
E58
Document Type: 
Working Paper

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