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OECD Productivity Working Papers

The OECD Productivity Papers are associated with the Global Forum on Productivity that provides a forum for mutual exchange of information and fosters international co-operation between public bodies with responsibility for promoting productivity-enhancing policies, including in undertaking joint policy analysis. It offers a platform for exchanging views, experiences and information, institutional and governance arrangements and government structures, with a view towards developing better policies. The Forum extends existing work in the OECD through a well-prioritised and coherent stream of analytical work serving the policy research needs of participants on the drivers of productivity growth.
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Unconventional monetary policy and productivity

Evidence on the risk-seeking channel from US corporate bond markets

We examine the relationship between lax monetary policy, access to high-yield bond markets and productivity in the US between 2008 and 2016. Using monetary policy surprises, obtained from changes in interest rates futures in narrow windows around FOMC announcements, we isolate the increased access to high-yield bond markets relative to investment-grade bond markets that is due to unconventional monetary policy (UMP). We find that through the risk-taking channel, UMP has increased investors’ appetite for high-yield US corporate bonds, thereby increasing access to high-yield bond markets for firms with a higher risk profile. Since the relationship between credit ratings and firm-level productivity is U-shaped, the aggregate effect on productivity is a priori unclear. Turning to the real economy, we thus analyse whether this additional access to finance had an effect on aggregate productivity by altering the reallocation of resources across firms. Our results show that unconventional monetary policy induced less investment in tangible capital by high-productive firms. However, before drawing conclusions on the net effects of UMP on aggregate productivity, we discuss a number of issues that this paper could not deal with due to data limitations, including prominently whether this apparent misallocation may have been offset by a shift in the composition of investments towards more intangible investment.

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Keywords: bond markets, capital reallocation, Unconventional monetary policy, United States, productivity
JEL: O16: Economic Development, Innovation, Technological Change, and Growth / Economic Development / Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance; O33: Economic Development, Innovation, Technological Change, and Growth / Innovation; Research and Development; Technological Change; Intellectual Property Rights / Technological Change: Choices and Consequences; Diffusion Processes; O47: Economic Development, Innovation, Technological Change, and Growth / Economic Growth and Aggregate Productivity / Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence; E52: Macroeconomics and Monetary Economics / Monetary Policy, Central Banking, and the Supply of Money and Credit / Monetary Policy; G32: Financial Economics / Corporate Finance and Governance / Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill; F23: International Economics / International Factor Movements and International Business / Multinational Firms; International Business; J63: Labor and Demographic Economics / Mobility, Unemployment, Vacancies, and Immigrant Workers / Labor Turnover; Vacancies; Layoffs; G21: Financial Economics / Financial Institutions and Services / Banks; Depository Institutions; Micro Finance Institutions; Mortgages; G33: Financial Economics / Corporate Finance and Governance / Bankruptcy; Liquidation; D22: Microeconomics / Production and Organizations / Firm Behavior: Empirical Analysis; D24: Microeconomics / Production and Organizations / Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
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Author(s)
Silvia Albrizio, Marina Conesa, Dennis Dlugosch and Christina Timiliotis

14 Jan 2019

48 pages

No. 17

https://doi.org/10.1787/06d2cce0-en

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