Monetary policy and corporate investment: evidence from India

Sajad Bagow and Nufazil Altaf

Journal of Financial Economic Policy, 2024, vol. 17, issue 4, 559-576

Abstract: Purpose - This study aims to investigate the impact of quantity-based and price-based monetary policy on corporate investment in India. Also the study investigates the impact of firm-level factors on corporate investment under quantity-based and price-based monetary policy. Design/methodology/approach - The study is based on sample of 3,782 non-financial Indian firms (45,238 observations) and the data has been collected for a period 2000–2023. The study applies instrument variable approach to arrive at the results. Findings - The study finds that both quantity-based and price-based monetary policy significantly affects corporate investment of firms and the transmission of monetary policy to corporate investment is constrained by firm-specific factors. This paper find that firm-specific factors play a significant role in transmitting the effects of both quantity-based as well as price-based monetary policy respectively and such results have also been witnessed across manufacturing and non-manufacturing sectors. Originality/value - To the best of the authors’ knowledge, this is the first study in the Indian context that examines the impact of quantity-based and price-based monetary policy on corporate investment.

Keywords: Monetary policy; Corporate investment; Firm-specific factors; India (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfeppp:jfep-04-2024-0103

DOI: 10.1108/JFEP-04-2024-0103

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