The Influence of the Monetary Policy on the Investment Polilcy of the Firm

Iuliana Predescu, Mihai Aristotel Ungureanu, Stela Aurelia Toader and Antoniu Predescu ()
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Antoniu Predescu: "Dimitrie Cantemir" Christian University

Knowledge Horizons - Economics, 2010, vol. 2, issue 1, 140-149

Abstract: This paper examines the impact of the monetary policy, perceptible through the variation of the interest rate, the exchange rate and the market value of shares, on the investment policy of the firm, most important being the interest rate and the market value of shares. Thus, the existent interest rate has a strong influence on the investments (that can be) realized by a company, affecting the cash-flows from which the company takes advantages of: on one side, if the firm is highly indebted, the cash-flows are much more sensitive to the variations of the interest rate – that, through interest expenses, affects the firm once more; on the other side, the liquidities own by the company improve not only for the façade the status of cash-flows. The market value of shares is important firstly for the fact it affects the firms’ decisions and secondly for being influence by – among other factors – the value of the interest rate.

Keywords: Interest rate; shares; cash-flow (search for similar items in EconPapers)
JEL-codes: G17 G19 G28 (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:khe:journl:v:2:y:2010:i:1:p:140-149

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