The Corporate Real Effects of CIP Deviations
- Filippo Ippolito, Jose Luis Peydro, Artashes Karapetyan, Ragnar Juelsrud and Olav Syrstad
- Working Paper
We show corporate real effects from Covered Interest Parity (CIP) deviations exploiting administrative data from Norway as well as CIP deviation shocks. Banks with access to U.S. money markets strongly increase USD global (short-term) funding in response to CIP deviations. This, in turn, leads to higher credit to non-financial firms, with weaker economic effects as banks hoard part of the extra funding as central bank deposits. The higher credit is supply-driven, as we control for firm-time fixed effects and we find higher credit volumes but lower loan interest rates for affected firms (i.e., those with higher pre-shock funding from banks with access to US funds). Loan-level results translate into firm-level bank debt and total debt results. However, corporate real effects are weaker. Despite strong effects on corporate sales (firm output), more affected firms (i.e., with higher credit availability) increase their fixed assets but it is completely driven by an increase in financial fixed assets, not through investment in real assets. Further, more affected firms pay out more dividends to shareholders. Overall, our evidence suggests limits of CIP deviations via banks into long-term real effects of corporations.
Working Papers inneholder forskningsarbeider og utredninger som vanligvis ikke har fått sin endelige form. Også andre faglige analyser fra økonomer i Norges Bank utgis i serien. Synspunkter og konklusjoner i arbeidene står for forfatternes regning.
ISSN 1502-8190 (online)