Does Counter-Cyclical Monetary Policy Promote Enterprise R&D Investment in a Recession? Empirical Evidence from China

Tingxi Wang and Hui Zhang
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Tingxi Wang: School of Business, Beijing Normal University, Beijing 100875, China
Hui Zhang: Institute of Quantitative & Technological Economics, Chinese Academy of Social Sciences, Beijing 100732, China

Sustainability, 2022, vol. 14, issue 10, 1-18

Abstract: Using the continuous difference-in-difference (DID) model, this paper analyzes the Chinese listed companies’ panel data from 2013 to 2019 by taking the rapid monetary policy easing in mid-2015 as the policy shocks to test the impact of loose monetary policy on enterprise R&D investment. The results show that loose monetary policy significantly weakened the negative impact of high leverage on enterprise R&D investment. After considering the heterogeneity and fixed effects of enterprise and industry characteristics, loose monetary policy still significantly improved highly leveraged enterprises’ R&D investment and showed a greater innovation-driving role in a competitive market environment. Based on this, this paper believes that The People’s Bank of China should continue to guide the decrease of medium- and long-term interest rates and promote benign competition among enterprises to improve the effectiveness of the monetary policy.

Keywords: monetary policy; creative economy; R&D investment (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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