Skip Navigation



RFS Advance Access published online on May 15, 2006
Review of Financial Studies, doi:10.1093/rfs/hhl002
This Article
Right arrow Full Text (Accepted Manuscript)
Right arrow All Versions of this Article:
19/3/829    most recent
hhl002v1
Right arrow Alert me when this article is cited
Right arrow Alert me if a correction is posted
Services
Right arrow Email this article to a friend
Right arrow Similar articles in this journal
Right arrow Alert me to new issues of the journal
Right arrow Add to My Personal Archive
Right arrow Download to citation manager
Right arrowRequest Permissions
Google Scholar
Right arrow Articles by Bolton, P.
Right arrow Articles by Freixas, X.
Right arrow Search for Related Content
Social Bookmarking
Add to CiteULike   Add to Connotea   Add to Del.icio.us  
What's this?

© The Author 2006. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org

Article

Corporate Finance and the Monetary Transmission Mechanism

Patrick Bolton 1 * and Xavier Freixas 2
1 Columbia University, 3022 Broadway, Uris Hall Room 804, New York, NY
2 Universitat Pompeu Fabra, Departament d’Economiques i Empresarials, C. Ra-mon Trias Fargas 25-27, Barcelona, 08005, Spain

* To whom correspondence should be addressed.
Patrick Bolton, E-mail: pb2208{at}columbia.edu


  Abstract

We analyze the transmission effects of monetary policy in a general equilibrium model of the financial sector, with bank lending and securities markets. Bank lending is constrained by capital adequacy requirements and asymmetric information adds a cost to outside bank equity capital. In our model, monetary policy does not affect bank lending through changes in bank liquidity; but rather, it operates through changes in the spread of bank loans over corporate bonds, which induce changes in the aggregate composition of financing by firms, and in banks’ equity-capital base. The model produces multiple equilibria, one of which displays all the features of a "credit crunch."


Add to CiteULike CiteULike   Add to Connotea Connotea   Add to Del.icio.us Del.icio.us    What's this?


This article has been cited by other articles:


Home page
 REV FINANC STUDHome page
F. Allen, E. Carletti, and R. Marquez
Credit Market Competition and Capital Regulation
Rev. Financ. Stud., November 23, 2009; (2009) hhp089v1.
[Abstract] [Full Text] [PDF]


Disclaimer: Please note that abstracts for content published before 1996 were created through digital scanning and may therefore not exactly replicate the text of the original print issues. All efforts have been made to ensure accuracy, but the Publisher will not be held responsible for any remaining inaccuracies. If you require any further clarification, please contact our Customer Services Department.