سیاست های پولی و پیش فرض شرکت های بزرگ

When a corporation issues debt with a fixed nominal coupon, the real value of future payments decreases with the price level. Forward-looking corporate default decisions therefore depend on monetary policy through its impact on expected inflation. We build a general equilibrium economy with deadweight bankruptcy costs that demonstrates how nominal rigidities in corporate debt create an important role for monetary policy even in the absence of standard nominal frictions such as staggered price setting in the output market. Under a passive nominal interest rate peg, the direct effects of a negative productivity shock combine with deflation to produce strong incentives for corporate default. A debt-deflationary spiral results when there are real costs of financial distress. Inflation targeting eliminates this amplification mechanism but full inflation targeting requires permitting the nominal interest rate to depend explicitly on credit market conditions.

The financial crisis of 2007/2008 and subsequent global recession has had a severe impact on both the default rates and credit spreads of firms. According to Moody's (Emery et al., 2009), the global default rate on speculative grade debt reached 13% in 2009, close to the previous high of 15.4% set in 1933, as shown in Fig. 1. Credit spreads similarly surged during the recent financial crisis, with the Baa–Aaa spread reaching a peak of just under 3.5% in 2008–2009. The last time the Baa–Aaa spread surpassed this level was also during the 1930's, as shown in Fig. 2. Hence, from the perspective of credit conditions, the recent recession has been the worst since the Great Depression.While the nominal interest rate declined with GDP during both the recent crisis and the Great Depression, the behavior of inflation has been markedly different. During the period 2007–2009 inflation has declined, but any deflation has, so far, been negligible as seen in Panel A of Fig. 3. By contrast, the 1930's were marked by substantial deflation. The decline in real GDP during the recent crisis has also been on a much smaller scale than during the Great Depression as shown in Panel B of Fig. 3. A vast literature studies the impact of monetary policy on inflation and output,1 and a growing subset of this work develops links between monetary policy and the microfoundations of corporate default and credit spreads.2In this paper we build on the observation that fixed-rate corporate obligations are typically denominated in nominal dollars, and are often long-lived. Hence a decrease in expected inflation, due for example to a monetary policy shock, increases the incentives of a corporation to default. We consider a cross-section of heterogeneous firms whose output depends on systematic as well as idiosyncratic productivity shocks. Following Merton (1974), Fischer et al. (1989), and Leland (1994), firms optimally issue perpetual risky debt to take advantage of a tax benefit to debt. They choose to default when the present value of coupon payments to bond holders is greater than the present value of future dividends. The corporate finance literature emphasizes substantial costs of financial distress, in the range of 5–20% of firm value for firms ranging from investment grade to bankrupt.3 Our model correspondingly permits that in the event of default, there are bankruptcy costs and bond holders take over the firm. Bankruptcy costs consist of transfers that leave aggregate output and the consumption of our aggregate consumer unchanged, as well as deadweight losses which do affect consumption. The endogenous relationship between inflation and output in our model differs from the standard New Keynesian approach which derives a Phillips curve from nominal rigidities in product or labor markets.4 Instead, the relation between output and inflation in our model derives solely from the sticky nature of nominal debt contracts combined with deadweight costs of financial distress. The stickiness of debt in our model stems from the assumptions of nominal debt contracts, perpetual maturity, and the inability to refinance debt except in default. Together these assumptions produce strong persistence in leverage ratios. Fama and French (2002) find that firms' debt ratios adjust slowly toward their targets. Leary and Roberts (2005) provide evidence that corporations rebalance their debt infrequently. Hence while our assumptions that generate stickiness in capital structure are strong, we believe that these features of the model capture an important nominal rigidity. Monetary policy in our model takes the form of an interest rate rule. The policy instrument is the short-term nominal interest rate, which may depend on the aggregate state variables of the model. The aggregate state variables are the systematic productivity shock, a monetary policy shock, and the distribution of firms across idiosyncratic shocks and leverage. Since the distribution of firms is high dimensional, we approximate its impact on output using the aggregate default rate of the economy. We follow Gallmeyer et al. (2007) who determine the endogenous inflation process under an interest rate rule using the Euler equation, and show how inflation incorporates risk premia stemming from fluctuations in the aggregate state variables of the economy. In our setting assets correlated with the aggregate default rate earn a risk premium because of the impact of default on aggregate consumption. Our analysis focuses on two principal monetary policy rules. Prior literature has examined tradeoffs in central bank policies aimed at stabilizing interest rates versus prices (e.g., Goodfriend, 1987; Khan et al., 2003; Goodfriend and King, 2009). The first monetary policy rule we consider is a nominal interest rate peg, an extreme form of stabilization which sets the short-term interest rate equal to a constant target plus noise. Such a policy is ‘passive’ in the sense that the policy rate does not respond to aggregate quantities or inflation. While a nominal interest rate peg is generally not regarded as desirable from a monetary policy point of view, it is useful in the context of the model as a diagnostic tool to demonstrate important mechanics involving the deadweight costs of corporate default and deflation. Under the interest rate peg, our endogenous inflation process is procyclical. As a consequence, in bad times when aggregate productivity is low, firms have at least two motivations to default on debt. First, low aggregate productivity implies low current and future output. Second, anticipated deflation in bad times implies that the expected real value of committed future coupons is increasing. Since these two motives for default are both countercyclical and thus reinforcing, corporate defaults cluster strongly together. When deadweight bankruptcy costs are present an additional amplification effect occurs under the interest rate peg. During a default wave the consumption and output trough is lower in the presence of deadweight bankruptcy costs than without such costs. The additional drop in consumption that occurs because of deadweight bankruptcy costs adds to the deflation that occurs during bad times, further increasing incentives for default. This cycle in which deflation contributes to default, which causes additional deflation captures important aspects of the debt deflation theory of Fisher (1933). Previous research develops aspects of the debt deflation theory using other transmission channels.5 The second monetary policy rule we consider is a constant inflation target. We show that with deadweight costs of default, implementation of an interest rate target requires that the short-term interest rate respond to credit market conditions, in our case the default rate. Inflation is naturally acyclical under this policy. Corporations still tend to default in bad times due to the direct effect of the aggregate productivity shock on cash flows, but variations in expected inflation do not amplify the waves of default. As a consequence, default waves are milder with an inflation target than under the interest rate peg, and the distribution of aggregate default rates is less volatile. Notably, default rates have a similar unconditional expectation under the two policies, but corporations have higher average leverage ratios under the inflation target and defaults tend to be more evenly spread through time.6 Our paper is related to recent work studying default in the context of monetary policy. Curdia and Woodford (2010) examine the effects of modifying monetary policy rules to depend on interest rate differentials or credit conditions. Their model is driven by heterogeneous preferences between borrowers and lenders but default is exogenous. Our model has a representative household, but default is endogenous. Goodfriend and McCallum (2007) study the impact of interest rate differentials on monetary policy in a model with a banking sector and money. While our framework has neither of these features, it differs from Goodfriend and McCallum (2007) because default is possible in equilibrium. The way we model default decisions builds on structural models of optimal capital structure and the pricing of corporate debt based on Leland (1994).7 Following Gomes and Schmid (2011), we extend this approach to general equilibrium by allowing default to have deadweight costs. Gomes and Schmid (2011) also model real investment and endogenize the entry of new firms, whereas our framework does not incorporate investment or endogenous entry. Instead, we introduce monetary policy, which impacts output via its effect on endogenous leverage and default decisions. Similar to the financial accelerator literature (e.g., Bernanke and Gertler, 1989; Bernanke et al., 1996; Kiyotaki and Moore, 1997), our model invokes frictions in credit markets to generate amplification of shocks to aggregate productivity. The financial accelerator literature emphasizes collateral constraints that become more binding as the wealth of borrowers relative to lenders declines following a negative aggregate shock. By contrast, in our model a single representative household finances all investment, and the sticky nature of long-term debt provides the source of financing frictions. This approach allows us to approximate realistic levels of default rates, credit spreads, and leverage ratios in a simple monetary macroeconomic model that offers considerable scope for further development. The outline of our paper is as follows. In Section 2, we develop a structural equilibrium model of heterogeneous firms that make optimal capital structure decisions trading off the tax benefits of debt against costs of financial distress. The monetary authority sets policy according to an interest rate rule, and firms incorporate this rule in forming their capital structure and default decisions. Deadweight bankruptcy costs are incurred when firms default. In Section 3, we calibrate the model and demonstrate the effects of monetary policy on aggregate default and output. Section 4 concludes. Proofs of all propositions are contained in a supplemental appendix, available on request.

Monetary policy impacts corporate default through its influence on inflation and inflation expectations. Passive monetary policy – as some would argue occurred during the Great Depression – generates procyclical inflation. Adverse real shocks thus generate strong deflationary pressures, compounding the incentives of corporations to default and thereby generating a potentially strong amplification mechanism. Inflation targeting or other policies that seek to eliminate procyclical inflation can dampen this amplification mechanism, reducing default rates and credit spreads and stabilizing output. Recent policy discussions and literature have placed considerable emphasis on incorporating credit market conditions into policy rules (e.g., Taylor, 2008, Curdia and Woodford, 2010). Our framework naturally suggests that credit conditions should be a part of monetary policy rules, whether through default rates as in our model, or through alternative indicators such as credit spreads. We see many directions for further research. First, our results are suggestive of an important link between monetary policy, corporate default and inflation, but meaningful quantitative application of the model to monetary policy practice will require the incorporation of sticky prices, as is standard in benchmark New Keynesian models. Second, our model assumes perfect credibility and commitment of the monetary authority to a fixed policy over time, and weakening this assumption may shed additional light on corporate default decisions. Credibility and commitment are clearly important policy considerations in light of recent discussions over moral hazard in corporate decision-making. Finally, the model we have considered assumes fixed-rate perpetual debt, but other tradeoffs may naturally appear when corporations issue shorter-maturity, floating-rate obligations.