The next Brown Bag Seminar is scheduled for Wednesday, May 10th, 2017, 13:00-14.00 in seminar room D4.0.008.

Our speaker will be Toni Whited (University of Michigan's Ross School of Business).

She will give a talk on "The Interest Sensitivity of Corporate Cash" (joint with Xiaodan Gao and Na Zhang).

Abstract: We document a hump-shaped relationship between interest rates and corporate cash demand that contradicts conventional wisdom, and we develop a theoretical framework to rationalize this finding. The model features external financing costs that are endogenously determined by interest rates. Interest rates affect corporate cash demand through two channels. First, forgone interest earnings imply an intuitive negative relation. Second, saved external borrowing costs imply a positive relation. The calibrated model quantitatively matches data features and reproduces the hump-shaped cash-interest relationship. This non-monotonic corporate money demand schedule has important implications for monetary policy.