American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Did Unconventional Interventions Unfreeze the Credit Market?
American Economic Journal: Macroeconomics
vol. 12,
no. 2, April 2020
(pp. 284–309)
Abstract
This paper investigates whether and how unconventional interventions in 2008–2010 unfroze the credit market. We construct a dataset of 198 interventions for 16 countries during 2008–2010 and examine heterogeneous responses in stock prices to the interventions across 7,873 nonfinancial firms in those countries. Stock prices increase when the interventions are announced, particularly for firms with greater intrinsic need for external capital. This pattern is corroborated by subsequent expansions in firm investment, R&D expenditure, and employment. Among various forms of interventions, recapitalization of banks appears particularly effective in channeling the intervention effects from financial to nonfinancial sectors.Citation
Tong, Hui, and Shang-Jin Wei. 2020. "Did Unconventional Interventions Unfreeze the Credit Market?" American Economic Journal: Macroeconomics 12 (2): 284–309. DOI: 10.1257/mac.20160023Additional Materials
JEL Classification
- E44 Financial Markets and the Macroeconomy
- E58 Central Banks and Their Policies
- G01 Financial Crises
- G14 Information and Market Efficiency; Event Studies; Insider Trading
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill