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Firm-level investment and monetary policy in Malaysia: do the interest rate and broad credit channels matter?

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  • Zulkefly Karim
  • W. Azman-Saini

Abstract

This paper examines the effects of monetary policy on investment spending in Malaysia for 1990–2008 using firm-level data. The focal point of this paper is two main channels of monetary policy transmission mechanism, namely, the interest rate and broad credit channels. Using a dynamic neoclassical investment function, empirical results based on system generalised method of moments (GMM) estimations and a sample of 419 firms support the relevance of both interest rate and broad credit channels in influencing investment spending. The results also reveal that the effect of monetary policy channels on firm investment is heterogeneous, such that small firms (i.e. credit-constrained firms) are more responsive to monetary tightening when compared to large firms (i.e. less constrained firms).

Suggested Citation

  • Zulkefly Karim & W. Azman-Saini, 2013. "Firm-level investment and monetary policy in Malaysia: do the interest rate and broad credit channels matter?," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 18(3), pages 396-412.
    • Handle: RePEc:taf:rjapxx:v:18:y:2013:i:3:p:396-412
    DOI: 10.1080/13547860.2012.742686
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    References listed on IDEAS

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    1. Jacques Mairesse & Bronwyn H. Hall & Benoît Mulkay, 1999. "Firm-Level Investment in France and the United States: An Exploration of What We Have Learned in Twenty Years," Annals of Economics and Statistics, GENES, issue 55-56, pages 27-67.
    2. Hsiao Chink Tang, 2006. "The Relative Importance Of Monetary Policy Transmission Channels In Malaysia," CAMA Working Papers 2006-23, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    3. Issing,Otmar & Gaspar,Vitor & Angeloni,Ignazio & Tristani,Oreste, 2001. "Monetary Policy in the Euro Area," Cambridge Books, Cambridge University Press, number 9780521783248.
    4. repec:adr:anecst:y:1999:i:55-56:p:02 is not listed on IDEAS
    5. Christopher F Baum, 2006. "An Introduction to Modern Econometrics using Stata," Stata Press books, StataCorp LP, number imeus, March.
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    Cited by:

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    2. Abdul Bahri, Elya Nabila & Mohd Nor, Abu Hassan Shaari & Sarmidi, Tamat & Haji Mohd Nor, Nor Hakimah, 2018. "Nonlinear Relationship between Financial Development and Economic Growth: Evidence from Post Global Financial Crisis Panel Data," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 52(1), pages 15-30.
    3. agarwal, shekhar & Gordon, Anna, 2022. "Complexities for the Indian Economy of China's Growing Technological Competence," OSF Preprints fk3r7, Center for Open Science.
    4. Chaleeda & Md. Aminul Islam & Tunku Salha Tunku Ahmad & Anas Najeeb Mosa Ghazalat, 2019. "The Effects of Corporate Financing Decisions on Firm Value in Bursa Malaysia," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 11(3), pages 127-135, March.
    5. Yang-Chao Wang & Jui-Jung Tsai & Lanxin Lu, 2019. "The impact of Chinese monetary policy on co-movements between money and capital markets," Applied Economics, Taylor & Francis Journals, vol. 51(45), pages 4939-4955, September.
    6. Bialowolski, Piotr & Weziak-Bialowolska, Dorota, 2014. "External factors affecting investment decisions of companies," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 8, pages 1-21.
    7. Chang, Kai & Zeng, Yonghong & Wang, Weihong & Wu, Xin, 2019. "The effects of credit policy and financial constraints on tangible and research & development investment: Firm-level evidence from China's renewable energy industry," Energy Policy, Elsevier, vol. 130(C), pages 438-447.
    8. agarwal, shekhar, 2022. "India’s Rising Technology Economy: Sources and Consequences," OSF Preprints x6yzm, Center for Open Science.

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