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China's monetary policy surprises and corporate real investment

Dong Lu, Huoqing Tang and Chengsi Zhang

China Economic Review, 2023, vol. 77, issue C

Abstract: We evaluate the effect of China's monetary policy shocks on corporate real investment. We propose a new approach to identify China's monetary policy shocks using high-frequency surprises based on treasury futures around monetary policy announcements as external instruments. We then estimate the dynamic effect of monetary policy shocks on corporate real investment using a rich firm-level data of all listed non-financial firms in China. We find that an unexpected monetary policy easing boosts firms' investment expenditures with heterogeneous dynamic responses across firms: small-sized firms have quicker responses than large-sized firms, especially for non-state-owned enterprises (non-SOEs). We show that sales revenue response could be the channel through which monetary policy shock transmits to non-SOEs' investment expenditures in China.

Keywords: Monetary policy; High-frequency identification; Proxy-VAR; Investment (search for similar items in EconPapers)
JEL-codes: E52 E58 F31 F33 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:77:y:2023:i:c:s1043951x22001511

DOI: 10.1016/j.chieco.2022.101893

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China Economic Review is currently edited by B.M. Fleisher, K. X. D. Huang, M.E. Lovely, Y. Wen, X. Zhang and X. Zhu

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