Corporate Debt Maturity Matters For Monetary Policy ∗ Joachim Jungherr

In addition, the model rationalizes the empirical role of the maturing bond share for the firm-level responses of debt, sales, and employment. [...] To this literature, we contribute the result that not only the level of debt (or leverage) is important, but also the precise timing of when this debt comes due.2 1Chodorow-Reich and Falato (2021) highlight the role of covenant violations in determining the effective maturity of bank loans during the 2007–2008 Financial Crisis. [...] Section 5 presents results from the quantitative model, compares them to the data, and studies the role of debt maturity for the cross- sectional and aggregate effects of monetary policy. [...] 4.1 First-order conditions The problem of a production firm (3.20) can be expressed in terms of three choice variables: the scale of production k′ and the amounts of short-term debt bS′ and long-term debt bL′. [...] The marginal cost of capital therefore depends on the price of capital Q and the marginal equity issuance cost ∂G(e)/∂e, shown on the first line of (4.1).