Research on cross-border transmission of monetary policy focuses overwhelmingly on the role of financial institutions as capital suppliers. I argue that nonfinancial firms, as capital demanders, are also important. In a large international sample, firms rebalance their debt away from (toward) currencies where monetary policy rates rise (fall). This behavior is more prominent when debt-market frictions are low and firm financial flexibility is high. Long-term debt and bank debt are especially sensitive to rebalancing. Finally, declines in foreign policy rates boost investment for the firms most able to borrow in foreign markets.
U.S. banks and nonfinancials have grown larger and fewer. Previous studies find that bank organization helps structure nonfinancial industries via the credit supply, but this paper shows that causality also runs the other way. I exploit plausible exogeneity in Walmart’s historical expansion to study the impact on banks of changes in local firms’ demand for bank credit. After Walmart enters a market, it replaces local establishments but not their local borrowing. Local banks expand real estate lending, reduce business and agricultural lending, and become more likely acquisition targets. Surviving banks grow larger, while local bank branch intensity declines.