Monetary policy transmission to investment: evidence from a survey on enterprise finance

Annalisa Ferrando, Sara Lamboglia and Eric Offner

No 3150, Working Paper Series from European Central Bank

Abstract: We study how survey-based measures of funding needs and availability influence the transmission of euro area monetary policy to investment. We first provide evidence that funding needs are primarily driven by fundamentals, while perceived funding availability captures financial conditions. Using these two measures, we assess how the effectiveness of monetary policy varies with fundamentals and financial conditions. Our results indicate that monetary policy is most effective when firms’ fundamentals are strong. In contrast, firms with favorable financial conditions exhibit a more muted investment response to monetary policy. By combining these two survey-based measures, we construct an indicator of financial constraints and show that financially constrained firms are more sensitive to monetary policy. These findings offer new light on the transmission of monetary policy to corporate investment, emphasizing not only the role of financial conditions, but also the importance of fundamentals, which are beyond the direct influence of central banks JEL Classification: C83, E22, E52

Keywords: central banking; financial conditions; firm heterogeneity; investment opportunities; survey data (search for similar items in EconPapers)
Date: 2025-11
New Economics Papers: this item is included in nep-cba, nep-fdg, nep-ifn, nep-inv and nep-mon
Note: 235236
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20253150

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