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Using LASSO-family models to estimate the impact of monetary policy on corporate investments

Petre Caraiani

Economics Letters, 2022, vol. 210, issue C

Abstract: In this paper, I use LASSO-family models to select the relevant explanatory variables for the transmission of monetary policy shocks on investments and discuss the implications for the transmission mechanism of monetary policy. The results here point to the effect that Lasso techniques help select the relevant regressors. When the covariates are selected using this procedure, the impact of monetary policy shocks on corporate investments is about 20% lower than that for a baseline approach.

Keywords: Monetary policy; Investment channel; Corporate finance; Firm-level data; Statistical learning; Lasso (search for similar items in EconPapers)
JEL-codes: E44 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.econlet.2021.110182

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