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Monetary Policy and Corporate Productivity in Emerging Markets

Author

Listed:
  • Nuobu Renzhi

    (Capital University of Economics and Business)

  • John Beirne

    (Asian Development Bank)

Abstract

This paper examines the impact of monetary policy shocks on firm-level productivity across 32 emerging market economies from 2000 to 2023, using panel local projections and a comprehensive firm-level dataset. We identify exogenous monetary policy shocks using a forward-looking Taylor rule and analyze their dynamic impact on total factor productivity. The results indicate a significant and persistent decline in productivity following a monetary-tightening shock. Crucially, financial frictions drive heterogeneous responses among firms: firms facing higher financial frictions experience more severe and prolonged productivity losses, whereas those with lower frictions recover more quickly. Additionally, firms characterized by low market power, younger age, or operation in financially vulnerable sectors, such as services, experience larger and longer-lasting productivity losses compared to their counterparts. Furthermore, we find asymmetric effects, whereby contractionary monetary shocks result in substantial productivity losses, while expansionary shocks fail to generate offsetting gains.

Suggested Citation

  • Nuobu Renzhi & John Beirne, 2025. "Monetary Policy and Corporate Productivity in Emerging Markets," ADB Economics Working Paper Series 793, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:021408
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    More about this item

    Keywords

    productivity; monetary policy; emerging markets;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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