<abstract xmlns="http://www.w3.org/1999/xhtml"><p>In this study I investigate what impact monetary policy shocks have on firms’ fixed investment, the less liquid portion of gross investment that requires more planning. I account for firms facing financial constraints firms by utilizing a common measure of asset size, which is used in previous literature. I use two exogenous, continuous series of monetary policy shocks to show that constrained firms have statistically different responses to policy than unconstrained firms. Specifically, I find that constrained firms’ fixed investment significantly responds more to monetary policy shocks than unconstrained firms.</p></abstract>

In this study I investigate what impact monetary policy shocks have on firms’ fixed investment, the less liquid portion of gross investment that requires more planning. I account for firms facing financial constraints firms by utilizing a common measure of asset size, which is used in previous literature. I use two exogenous, continuous series of monetary policy shocks to show that constrained firms have statistically different responses to policy than unconstrained firms. Specifically, I find that constrained firms’ fixed investment significantly responds more to monetary policy shocks than unconstrained firms.

Financial Constraints and the Response of Business Investment to Monetary Policy Shocks

Anisfield School of Business, Ramapo College of New Jersey

Journal of Central Banking Theory and Practice

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

In this study I investigate what impact monetary policy shocks have on firms’ fixed investment, the less liquid portion of gross investment that requires more...

Financial Constraints and the Response of Business Investment to Monetary Policy Shocks

Published Online: Sep 23, 2016

Page range: 31 - 46

Received: Jan 27, 2016

Accepted: Mar 10, 2016

DOI: https://doi.org/10.1515/jcbtp-2016-0018

Keywords
Business Investment, Monetary Policy

© 2016 Central Bank of Montenegro

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Financial Constraints and the Response of Business Investment to Monetary Policy Shocks

Published Online: Sep 23, 2016

Page range: 31 - 46

Received: Jan 27, 2016

Accepted: Mar 10, 2016

DOI: https://doi.org/10.1515/jcbtp-2016-0018

KeywordsBusiness Investment, Monetary Policy

© 2016 Central Bank of Montenegro

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Keywords
Business Investment, Monetary Policy