Monetary Policy and Corporate Productivity in Emerging Markets

Nuobu Renzhi and John Beirne
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Nuobu Renzhi: Capital University of Economics and Business

No 793, ADB Economics Working Paper Series from Asian Development Bank

Abstract: This paper examines the impact of monetary policy shocks on firm-level productivity across 32 emerging market economies from 2000 to 2023, using panel local projections and a comprehensive firm-level dataset. We identify exogenous monetary policy shocks using a forward-looking Taylor rule and analyze their dynamic impact on total factor productivity. The results indicate a significant and persistent decline in productivity following a monetary-tightening shock. Crucially, financial frictions drive heterogeneous responses among firms: firms facing higher financial frictions experience more severe and prolonged productivity losses, whereas those with lower frictions recover more quickly. Additionally, firms characterized by low market power, younger age, or operation in financially vulnerable sectors, such as services, experience larger and longer-lasting productivity losses compared to their counterparts. Furthermore, we find asymmetric effects, whereby contractionary monetary shocks result in substantial productivity losses, while expansionary shocks fail to generate offsetting gains.

Keywords: productivity; monetary policy; emerging markets (search for similar items in EconPapers)
JEL-codes: D22 D24 E52 (search for similar items in EconPapers)
Pages: 25
Date: 2025-07-18
New Economics Papers: this item is included in nep-cba, nep-fdg and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:ris:adbewp:021408

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