The Profitability Channel of Monetary Policy Transmission

Alex Hsu (), Indrajit Mitra and Linghang Zeng
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Alex Hsu: https://www.scheller.gatech.edu/directory/faculty/hsu/index.html

No 2023-6, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: We provide firm-level evidence that Federal Open Market Committee announcements have real effects by changing expectations of firm profitability. We use an existing decomposition of a monetary policy shock into a central bank information component (CBI) and a conventional monetary component (MP). We find (1) firms with a higher value of capital asset pricing model (CAPM) beta have a higher investment rate sensitivity to the CBI component; no similar heterogeneity in investment response is observed for the MP component. We also find (2) the heterogeneity in investment sensitivity is due to innovations to firm profitability.

Keywords: monetary policy; Fed information shocks; investments; CAPM beta (search for similar items in EconPapers)
JEL-codes: E22 E52 G31 (search for similar items in EconPapers)
Pages: 42
Date: 2023-06-20
New Economics Papers: this item is included in nep-cba, nep-fdg and nep-mon
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Published in 2023

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Related works:
Working Paper: The Profitability Channel of Monetary Policy Transmission (2023)
Working Paper: The Profitability Channel of Monetary Policy Transmission (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedawp:96611

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DOI: 10.29338/wp2023-06

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