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Corporate Credit Provision
Productive firms can access credit markets directly—by issuing corporate bonds—or in an intermediated manner—by borrowing through loans. In this paper, we study how the macroeconomic environment, including inflation, the stage of business cycle, and the stance of monetary policy, affects firms’ decisions of which debt market to access. Tighter monetary policy leads to firms borrowing more using intermediated credit, while higher inflation rates lead firms to lock in financing rates by issuing corporate bonds. Moreover, we also explore the role that heterogeneity in leverage across ...