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Employment and the residential collateral channel of monetary policy


Journal of Monetary Economics



Authors / Editors

Bahaj S;Foulis A;Pinter G;Surico P


Publication Year



Using micro-data covering private and public UK firms, we document heterogeneous responses to monetary policy; finding that employment at younger, more-levered firms is most sensitive. This heterogeneity is consistent with firm-level financial constraints. To show this, we exploit the fact that the homes of company directors are a key source of corporate collateral, but many directors live in a different region to their firm, allowing specifications controlling for demand. Younger, more-levered firms exposed to collateral fluctuations drive the employment response, showing a residential collateral channel in the transmission of monetary policy to firms.


Firm heterogeneity; Financial constraints; SME financing; Monetary policy transmission

Available on ECCH


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