Tobias König - Research

Working Papers:

The Investment Channel of Monetary Policy: Evidence from Norway, with Jin Cao, Torje Hegna, Martin Blomhoff Holm, Ragnar Juelsrud, and Mikkel Riiser

We investigate the transmission of monetary policy to investment using Norwegian administrative data. We have two main findings. First, financially constrained firms are more responsive to monetary policy, but the effect is modest; suggesting that firm heterogeneity plays a minor role in monetary transmission. Second, we disentangle the investment channel of monetary policy into direct effects from interest rate changes and indirect general equilibrium effects. We find that the investment channel of monetary policy is due almost exclusively to direct effects. The two results imply that a representative firm framework with investment adjustment frictions in most cases provides a sufficiently detailed description of the investment channel of monetary policy.

Presented at: Junior Finance and Macro Conference*, University of Chicago, United States; Helsinki GSE*, Helsinki, Finland; Norges Bank Research Spring Institute 2022, Venastul, Norway; 9th Young Researchers Workshop of the CRC TR 224, Bonn, Germany; KCL Workshop on Empirical and Theoretical Macroeconomics 2023, London, UK; 10th Workshop on Empirical Macroeconomics, Ghent, Belgium

* presented by co-author

The Macroeconomic Effects of a European Deposit (Re-)Insurance Scheme, (updated version 2023) with Marius Clemens and Stefan Gebauer

revise and resubmit, Journal of Money, Credit and Banking

Recent proposals for a still missing European deposit insurance scheme (EDIS) argue in favor of a reinsurance framework. In this paper, we use a regime-switching open-economy DSGE model with bank default to assess the relative efficiency of such a scheme. We find that reinsurance by EDIS is more effective in stabilizing real activity, credit, and welfare than a national fiscal backstop. We demonstrate that risk-weighted contributions to EDIS are welfare-beneficial for depositors and discuss trade-offs policymakers face during the implementation of EDIS. We also find that macroprudential regulation and EDIS can complement each other and that EDIS can prevent bank runs under certain conditions.

Presented at: 13th RGS Doctoral Conference,Dortmund; Norges Bank Brown Bag Seminar, Oslo; Verein für Socialpolitik Annual Conference 2020, Köln; Banque de France Atelier DGSEI*, Paris; RES 2021; Annual Conference , Belfast ; Spring Meeting of Young Economists 2021*, Bologna; 37th International Symposium on Money, Banking and Finance, Paris

* presented by co-author

DIW Discussion Paper

Policy Note

Coverage by Handelsblatt

Coverage by Reuters

The Financial Accelerator, Wages and Optimal Monetary Policy

The effects of labor market outcomes on firms’ loan demand and on credit intermediation are studied in this paper. In a first step, I investigate how wages in the production sector affect bank net worth and the process of financial intermediation in partial equilibrium. Second, the role of the identified channels are studied in general equilibrium using a new-Keynesian DSGE-model with financial frictions and an endogenous financial accelerator mechanism. Third, I investigate in this setting the transmission mechanism of monetary policy. The analysis reveals that financial frictions reduce the factor demand elasticity of capital to a change in wages. This finding is relevant for the determination of optimal monetary policy, both for financial shocks and supply shocks inflation stabilization imposes high welfare costs. At the same time, stabilizing nominal wages becomes welfare beneficial by reducing both the volatility of the credit spread and the output gap.

Presented at: 50th MMF Annual Conference, Edinburgh; 14th Dynare Conference, Frankfurt; ECB Internal Research Seminar, Frankfurt; RES Symposium of Junior Researchers 2019, Conventry; CEF 2019, Ottawa; Workshop on Monetary and Financial Macroeconomics, Hamburg; EEA-ESEM 2019, Manchester

DIW Discussion Paper

Work in Progress:

Firm Heterogeneity and the Capital Market

I investigate the importance of different types of financial constraints on firms for the transmission of external equity demand shocks and monetary policy shocks. External equity financing shocks are constructed from firm-level data using the Granular Instrumental Variables. I find that firms with high expected future profitability increase their investment relatively more when capital market funding conditions are exogenously improved. The relevance of Tobin's Q cannot be confirmed however for the transmission of monetary policy shocks. Instead firm liquidity explains the heterogeneity in firm investment rates. The level of firm debt is only significant for the transmission of monetary policy prior to the zero lower bound periods. My results imply that policymakers have to consider the role of both monetary policy and access to capital markets to stimulate firm investment.

Presented at: D-A-CH Online-Workshop: "Towards a micro-funded theory of monetary policy" ; CEF 2021, Tokyo; 25th ICMAIF 2021 , Rethymno ; MMF Annual Conference 2021, Cambridge, UK ; VfS Jahrestagung 2021, Regensburg, Deutschland; Bundesbank; ASSA 2022 Annual Meeting, Boston, United States; Bank of Lithuania; Bank of England; University of Bonn; 15th RGS Doctoral Conference; 26th Spring Meeting of Young Economists, Orléans, France