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Monetary transmission to firm-level research and development

Author

Listed:
  • Ruslana Datsenko

    (Bank of England)

  • Martin B Holm

    (University of Oslo and CEPR)

Abstract

Monetary policy is usually evaluated through aggregate output and inflation, with less attention to how it reallocates innovative investment across firms. Existing evidence shows that higher rates reduce innovation, but the firms driving this response remain unclear. Combining Norway’s research and development (R&D) survey with administrative data and narrative monetary shocks for 2001–18, we estimate heterogeneous firm responses. Contractionary policy reduces R&D most in high-growth firms with recent equity issuance, consistent with the asset-price channel of monetary transmission. Standard debt-based measures explain little heterogeneity. Monetary policy therefore has long-run real effects primarily by reducing R&D in high-growth innovative firms.

Suggested Citation

  • Ruslana Datsenko & Martin B Holm, 2026. "Monetary transmission to firm-level research and development," Bank of England Staff Working Paper series 1192, Bank of England.
    • Handle: RePEc:boe:boeewp:023314
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    File URL: https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2026/monetary-transmission-to-firm-level-r-and-d.pdf
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    More about this item

    Keywords

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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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