Employment and the residential collateral channel of monetary policy

Bahaj, S, Foulis, A, Pinter, G and Surico, P (2022) Employment and the residential collateral channel of monetary policy. Journal of Monetary Economics. ISSN 0304-3932 (In Press)

Abstract

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.