Working Paper: CEPR ID: DP3191
Authors: Hedva Ber; Asher Blass; Oved Yosha
Abstract: Using firm-level data, we provide evidence that, although monetary policy affects real investment, the effect operates differentially: the greater its export intensity the less a firm is affected by tight money. We examine several interpretations and conclude that the impact is transmitted primarily through the supply side due to differential access to credit markets. This finding lends support to the commonplace view that monetary policy is less effective the more open the economy.
Keywords: corporate finance; interest rate; investment; leverage; liquidity; publicly traded firms; Tobin's q
JEL Codes: D20; E44; E55
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tighter monetary policy (E52) | real investment (E22) |
| export intensity (C59) | negative effect on real investment (E22) |
| differential access to credit markets (G21) | varying impacts of monetary policy on investment decisions (E43) |
| tighter monetary policy (E52) | differential impact based on export intensity (F14) |