Monetary policy shocks and firm investment decisions: Evidence from China

Lunan Jiang, Yinghui Chen and Lin Zhang

International Review of Financial Analysis, 2024, vol. 95, issue PB

Abstract: This paper investigates how unexpected monetary policy changes affect corporate investment decisions in China. Using monetary policy shocks estimated with a sophisticated technique, we show that Chinese public firms significantly change their investment to accommodate unexpected monetary policy shifts. Moreover, such a reaction is significant mainly when a restrictive monetary policy shock occurs and can last for six quarters. Further cross-sectional analyses confirm that the heterogeneous responses of investment depend on many firm-level characteristics, such as firm ownership, growth opportunities, local market development, and firm age.

Keywords: Monetary policy shocks; Corporate investment; Ownership status; Growth opportunities; Market economy development (search for similar items in EconPapers)
JEL-codes: E52 G31 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:95:y:2024:i:pb:s1057521924003454

DOI: 10.1016/j.irfa.2024.103413

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