In contrast to conventional money demand literature, this paper proposes that monetary policy affects corporate liquidity demand directly through a separate channel-what we call "the loan commitment channel." Upon persistent monetary policy shocks, firms make substitutions between sources of...

Using disaggregated panel data, we examine how firms change trade credit in response to a monetary tightening. We find that both accounts payable and accounts receivable increase with tighter monetary policy, implying that trade credit helps firms absorb the effect of a credit contraction....

Based on an analysis of high-frequency panel data for U.S. firms, this paper finds that inventory investment has been liquidity-constrained in most periods during 1975-97, but less so, or not at all, during recessions. This result can be justified on the grounds that inventory fluctuations are...

Many studies examine why firms are financed by their suppliers, but few empirical studies look at the macroeconomic implications of such financial arrangements. Using disaggregated panel data, we examine how firms extend and use trade credit. We find that, controlling for the transactions or...

This paper provides new evidence that the interest rates response to a money supply shock varies across the state of the monetary policy stance. The state is assigned to one of the tight, neutral, and loose regimes based on an estimated policy stance index. The results of threshold vector...

The paper examines the link between net capital flows and international reserves emphasizing the external financing of reserve accumulation in the context of increasing international financial integration. The paper finds that the effect of net capital flows on reserve accumulation has shifted...

This paper investigates the behavior of short-term real and nominal rates of interest by combining consumption-based and production-based models into a single general equilibrium framework. Based on the theoretical nonlinear relationships that link interest rates to both the marginal rates of...

This paper estimates a policy rule that explains the sign and the magnitude of the Federal Reserve's (Fed's) discount rate changes. It sets out a two-sided Type II Tobit model and develops a procedure for its estimation, considering the discrete and censored nature of the changes. The results...