Essays on Monetary and Fiscal Policies and Firms
Open Access DepositedCloyne et al., 2023
During the COVID-19 pandemic, firm entry began surging and continued at elevated levels through 2021 and 2022, producing interest in young firms and their effects on the economy. In parallel, a growing literature has been examining the effect of firm age on monetary policy transmission. Much of the literature finds that young firms are more responsive than older firms to monetary policy shocks (Cloyne et al., 2023
This dissertation consists of three essays examining the relationship between monetary and fiscal policies and firms. Chapter 1
Thürwächter, 2022
Durante et al., 2022). In contrast, Casiraghi et al. (2021) find that the shares of start-ups and young firms persistently weaken the transmission of conventional monetary policy to income, wages, and employment. I seek to understand the effect of the shares of startups and young firms on unconventional monetary policy transmission to income and employment between 2008q4 and 2015q4, the first zero lower bound period. Using a fixed effects model and Jordà (2005) style local projections along with shocks created by Swanson (2021), I find that the shares of start-ups and young firms by state strengthen the transmission of forward guidance to income and employment and have no effect on the transmission of LSAPs. Additional analysis reveals similar results to Casiraghi et al. (2021), when studying young firms and conventional monetary policy transmission between 1991q3 and 2007q4.
Jeenas, 2024
There is a burgeoning literature on conventional monetary policy transmission and firm heterogeneity. Studies have found varying firm characteristics, including smaller, younger, more indebted, and less liquid, as being more responsive to conventional monetary policy shocks (Gertler and Gilchrist, 1994
Ottonello and Winberry, 2020
During the COVID-19 pandemic, one of the largest fiscal programs in recent history, the Paycheck Protection Program (PPP), was enacted. Disbursed by banks, PPP loans intended to provide liquidity to small businesses in order to finance business needs during the initial economic downturn. I study the effects of PPP on local lending, specifically examining whether PPP loans increased local small business loans, and subsequently impacted business dynamism at the county-level. I find that PPP distributions by large commercial banks appear to positively affect small business lending by large banks. Accordingly, the increase in lending by large banks is associated with an increase in establishment entry and job births at the county level. I additionally find that county-level PPP exposure differentially impacted establishments and associated employment based on the size of the disbursement bank and the size of the firm. Chapter 3
Durante et al, 2022). I seek to build upon the literature by examining the effects of notable firm characteristics on the transmission of unconventional monetary policies. Specifically, I examine how firm age, size, liquidity, and leverage affect the transmission of LSAPs, Odyssean forward guidance, and Delphic forward guidance shocks to investment. Using a fixed effects model and Jordà (2005) style local projections as well as shocks developed by Jarociński (2024), I find varying effects by unconventional monetary policy type and firm characteristic. Chapter 2
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