This paper studies a model in which a low monetary policy rate lowers the cost of capital for entrepreneurs, potentially spurring productive investment. Low interest rates, however, also induce entrepreneurs to lever up so as to increase payouts to equity. Whereas such leveraged payouts...

We analyze how regulatory constraints on household leverage—in the form of loan-to-income and loan-to-value limits—affect residential mortgage credit and house prices as well as other asset classes not directly targeted by the limits. Supervisory loan level data suggest that mortgage credit...

We document capital misallocation in the U.S. investment-grade (IG) corporate bond market, driven by quantitative easing (QE). Prospective fallen angels–risky firms just above the IG rating cutoff–enjoyed subsidized bond financing since 2009, especially when the scale of QE purchases peaked...

We document capital misallocation in the U.S. investment-grade (IG) corporate bond market, driven by quantitative easing (QE). Prospective fallen angels—risky firms just above the IG rating cutoff—enjoyed subsidized bond financing since 2009, especially when the scale of QE purchases peaked...