The Role of Central Banks in the Corporate Landscape

Since the Global Financial Crisis, central banks across the globe have faced numerous challenges, including bringing inflation to target, maintaining financial stability, and addressing their role in the green transition. This dissertation presents three papers that study these macro-economic challenges from a micro-economic firm perspective, thereby bridging the gap between central banking and corporate finance. Each paper delves into a different challenge previously described, yet they all demonstrate that corporate dynamics play a fundamental role in explaining the aggregate outcomes. Moreover, they underline that a comprehensive understanding of the corporate landscape and its ongoing development is crucial for effective monetary policy-making. Chapter 2 provides novel evidence in the direction of financial instability by showing that the Federal Reserve’s Quantitative Easing program appears to have distorted prices in important segment of the U.S. corporate bond market, namely among the riskiest BBB-rated bonds, leading to a build-up of vulnerabilities in the economy. Chapter 3 addresses the ongoing discussions surrounding central banks and financing the green transition. It discusses the findings that firms have used the Corporate Sector Purchase Program, i.e. a Quantitative Easing program of the ECB, to increase their investment in green innovation and to decarbonize their business operations. Chapter 4 studies the (dis-)inflationary dynamics in the past decades, and finds evidence that the rise in corporate market power, as reflected by the steady and broad increase in firm-level markups, can have implications for the pass-through of cost-push shocks. It shows that high markups reduce the pass-through of cost-push shocks, in the form of global oil supply shocks, but only when the shocks are dis-inflationary.

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