Alina Bartscher, Frankfurt School of Finance & Management

"Causal Effects of Interest Rate Beliefs on Firm Decisions and Their Aggregate Implications"

Abstract

We study firms' financial and real decisions after an exogenous change in their interest rate beliefs induced by a survey experiment with an information treatment. Firms revise their expectations downward after learning about the European Central Bank's policy rate. Moreover, we find a reduction in interest rate uncertainty. We link the survey to credit register data and find that treated firms both increase their loan amounts and shift their loan structure toward longer-term, fixed-rate credit with lower interest rates. Using balance sheet data, we also show that treated firms invest more following the RCT. These effects are driven by small firms. We rationalize our findings in a stylized model of firms with imperfect information about the interest rate.

Co-authors: Georg Duernecker, Johannes Goensch, and Nils Wehrhöfer

For more information about Alina Bartscher and her interesting work - link to her website.

Contact person: Manuel Menkhoff