N°26-32: Business Owner Wealth and the Credit Channel of Monetary Policy

Using data on small business owners' private wealth, firm loan applications, and credit scores, we show that monetary policy's impact on credit access depends heavily on owner wealth. Controlling for firm quality, expansionary policy significantly boosts loan approvals for low-wealth owners, but not their high-wealth counterparts. Because securing a loan enables owners to build future wealth, this credit channel carries clear distributional consequences. Survey data from 19 euro area countries corroborate these findings, revealing that the effect transmits primarily through weakly capitalized and less liquid banks.