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

Timothy J. Haase ()
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Timothy J. Haase: Anisfield School of Business, Ramapo College of New Jersey

Journal of Central Banking Theory and Practice, 2016, vol. 5, issue 3, 31-46

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.

Keywords: Business Investment; Monetary Policy. (search for similar items in EconPapers)
JEL-codes: E52 G31 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:cbk:journl:v:5:y:2016:i:3:p:31-46

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