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Corporate market power and monetary policy transmission in Asia

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  • Renzhi, Nuobu
  • Beirne, John

Abstract

This paper empirically examines the effect of corporate market power on monetary policy transmission in Asia. Using panel local projections based on a firm-level dataset for 11 advanced and emerging Asian economies, we find that after a monetary policy tightening, the real sales of firms with low market power significantly decline, while real sales of firms with high market power respond little. Moreover, we find that the average responses of firms’ real sales to monetary policy shocks are driven by firms with low markups. Our findings indicate that rising market power impairs the effective transmission of monetary policy. We discuss the implications in terms of balancing the need for industrial policies that promote innovation-led productivity against effective competition policy to compress heterogeneity in market power dynamics and enhance the monetary policy transmission mechanism.

Suggested Citation

  • Renzhi, Nuobu & Beirne, John, 2023. "Corporate market power and monetary policy transmission in Asia," Pacific-Basin Finance Journal, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:pacfin:v:82:y:2023:i:c:s0927538x23002032
    DOI: 10.1016/j.pacfin.2023.102132
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    Keywords

    Corporate market power; Monetary policy transmission; Asia;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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