Author

Ling Jin (Inha University, eve_jinling@hotmail.com)

Abstract

This paper examines how monetary policy affected the borrowing cost of listed firms in Korea before and after the Global Financial Crisis (GFC). I find that the effects of credit channel of monetary transmission are different by the assets size and debt-equity ratio levels of firms. Also, I find that the relationship between monetary policy and the borrowing spread of firms has changed before and after the GFC. The relationship is only significantly positive after the GFC. A statistically significant positive value implies that credit channel works in Korea. As for firm asset size partition, the relationship is significantly positive only after the GFC. As for firm debt-to-equity ratio partition, the coefficient of monetary policy for the low debt-to-equity ratio firms is significant of before and after the GFC. In contrast, the coefficient for the high debt-to-equity ratio firms is significant only before the GFC. Also, the U.S monetary policy has a significant impact on domestic firm’s borrowing spreads after the GFC. These relationships work through international banking channels.

Keywords: Monetary policy Transmission, Credit channel, Borrowing spread, Firm-level data, International banking

Link to the paper: https://drive.google.com/file/d/1ZjqbqEHxC-Vy3m9MErlHfphqTE4oqZzf/view?usp=sharing