Fixed investment, liquidity constraint, and monetary policy: Evidence from Japanese manufacturing firm panel data

Koichi Masuda

Japan and the World Economy, 2015, vol. 33, issue C, 11-19

Abstract: We empirically analyze the effects of monetary policy shocks on real fixed investment using panel data on Japanese manufacturing firms to examine the existence of a balance sheet channel. We find that contractionary monetary policy statistically significantly increases the firms’ liquidity constraint. Especially, the smaller the firm size, the greater the effects of contractionary monetary policy. Therefore, our estimation results support the presence of a balance sheet channel. In addition, the firms’ liquidity constraint decreases significantly during quantitative monetary easing policy (QMEP) period. Specifically, QMEP relaxes the liquidity constraint of large firms. Our evidence suggests that QMEP transmission works through the balance sheet channel and affects the real economy.

Keywords: Monetary policy shock; Real fixed investment; Net worth (search for similar items in EconPapers)
JEL-codes: E51 E52 G31 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S092214251500002X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:33:y:2015:i:c:p:11-19

DOI: 10.1016/j.japwor.2015.01.001

Access Statistics for this article

Japan and the World Economy is currently edited by Robert Dekle and Yasushi Hamao

More articles in Japan and the World Economy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().