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Monetary policy transmission to firms’ investments — It may depend on the tool

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  • Laine, Olli-Matti

Abstract

This letter studies monetary policy transmission to public companies’ investments in the euro area using firm-level data. Rate hikes are estimated to decrease investments. When it comes to unconventional monetary policy tools, no statistically significant effect on the average firm’s investments is found. However, there is heterogeneity across firms: all the assessed monetary policy tools are estimated to affect firms with low leverage and high market capital. When it comes to firms’ profitability, no evidence about heterogenous effects is found. The results are different when it comes to employment.

Suggested Citation

  • Laine, Olli-Matti, 2023. "Monetary policy transmission to firms’ investments — It may depend on the tool," Economics Letters, Elsevier, vol. 229(C).
    • Handle: RePEc:eee:ecolet:v:229:y:2023:i:c:s0165176523002422
    DOI: 10.1016/j.econlet.2023.111217
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    References listed on IDEAS

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    1. Altavilla, Carlo & Brugnolini, Luca & Gürkaynak, Refet S. & Motto, Roberto & Ragusa, Giuseppe, 2019. "Measuring euro area monetary policy," Journal of Monetary Economics, Elsevier, vol. 108(C), pages 162-179.
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    8. Mikkel Plagborg‐Møller & Christian K. Wolf, 2021. "Local Projections and VARs Estimate the Same Impulse Responses," Econometrica, Econometric Society, vol. 89(2), pages 955-980, March.
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    Cited by:

    1. Cohen, Lior, 2023. "The effects of the BoJ's ETF purchases on equities and corporate investment," Economic Modelling, Elsevier, vol. 129(C).

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    More about this item

    Keywords

    Investment; Firm heterogeneity; Monetary policy;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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