Loose Monetary Policy and Corporate Investment of Manufacturing Firms in the Czech Republic

Kajurová, Veronika; Linnertová, Dagmar

doi:10.2478/revecp-2018-0019

Abstract

The aim of the paper is to evaluate the effects of loose monetary policy on corporate investment of manufacturing firms in the Czech Republic during the period between 2006 and 2015. The main focus of the paper is on the effect of low interest rates on investment activity of Czech firms; additionally, the effects of interactions between interest rate and other firm-specific variables are investigated. The results indicate that corporate investment is positively associated with firm size, investment opportunities, and long term debt. Also, a negative effect of the cash position is found. Further, the findings show that monetary policy is a significant determinant of firm investment activity: when the monetary policy is loose, investment is positively affected. Furthermore, differences in the determinants of investment between highly and low leveraged firms were revealed.

References

Amadeus Bureau Van Dijk Database. Last Data Update: 18/01/2017.
Search in Google Scholar Back to article
Aliyev, R., Hájková, D., & Kubicová, I. (2015). The Impact Of Monetary Policy On Financing Of Czech Firms. Czech Journal Of Economics And Finance, 65(6), 455-476.
Search in Google Scholar Back to article
Angelopoulou, E., & Gibson, H.D. (2009). The Balance Sheet Channel Of Monetary Policy Transmission: Evidence From The United Kingdom. Economica, 76(304), 675-703. Doi: 10.1111/J.1468-0335.2008.00710.X10.1111/J.1468-0335.2008.00710.X
Open DOI Search in Google Scholar Back to article
Bernanke, B.S., & Gertler, M. (1995). The Credit Channel Of Monetary Policy Transmission. The Journal Of Economic Perspectives, 9(4), 27-48.Doi: 10.1257/Jep.9.4.2710.1257/Jep.9.4.27
Open DOI Search in Google Scholar Back to article
Bougheas, S., Mizen, P., & Yalcin, C. (2006). Access To External Finance: Theory And Evidence On The Impact Of Monetary Policy And Firm-Specific Characteristics. The Journal Of Banking & Finance, 30(1), 199-227. Doi: 10.1016/J.Jbankfin.2005.01.00210.1016/J.Jbankfin.2005.01.002
Open DOI Search in Google Scholar Back to article
Chatelain, J.-B., Generale, A., Hernando, I., Vermeulen, P., Kalckreuth, U.V. (2003). New Findings On Firm Investment And Monetary Policy Transmission In The Euro Area. Oxford Review Of Economic Policy, 19(1), Pp. 1-11. Deutsche Bundesbank (2017). Glossary. Available At: Https://Www.Bundesbank.De/Navigation/En/Service/Glossary/Glossary.Html.
Search in Google Scholar Back to article
Fidrmuc, J, Horváth, R. & Horváthová, E. (2010). Corporate Interest Rates And The Financial Accelerator In The Czech Republic. Emerging Markets Finance And Trade, 46(4), Pp. 41-54.10.2753/REE1540-496X460403
Search in Google Scholar Back to article
Fu, Q. & Liu, X. (2015). Monetary Policy And Dynamic Adjustment Of Corporate Investment: A Policy Transmission Channel Perspective. China Journal Of Accounting Research, 8(2), 91-109. Doi: 10.1016/J.Cjar.2015.03.00110.1016/J.Cjar.2015.03.001
Open DOI Search in Google Scholar Back to article
Gertler, M., & Gilchrist, S. (1994). Monetary Policy, Business Cycles, And The Behavior Of Small Manufacturing Firms. Quarterly Journal Of Economics, 109(2), 309-340. Doi: 10.2307/211846510.2307/2118465
Open DOI Search in Google Scholar Back to article
Haan, De L., & Sterken, E. (2006). The Impact Of Monetary Policy On The Financing Behaviour Of Firms In The Euro Area And The Uk. The European Journal Of Finance, 12(5), 401-240. Doi: 10.1080/1351847050045984010.1080/13518470500459840
Open DOI Search in Google Scholar Back to article
Horváth, R. (2006). Financial Accelerator Effects In The Balance Sheets Of Czech Firms (William Davidson Institute Working Paper No. 847). University Of Michigan.10.2139/ssrn.945635
Search in Google Scholar Back to article
Kajurová, V., & Linnertová. D. (2018). The Effects Of Single Monetary Policy On Financial Position Of Firms In The Slovak Republic. Ekonomický Časopis / Journal Of Economics, 66(7), 681-702.
Search in Google Scholar Back to article
Karpavičius, S., & Yu, F. (2017). The Impact Of Interest Rates On Firms' Financing Policies. Journal Of Corporate Finance, 45, 262-293. Doi: 10.1016/J.Jcorpfin.2017.05.00710.1016/J.Jcorpfin.2017.05.007
Open DOI Search in Google Scholar Back to article
Masuda, K. (2015). Fixed Investment, Liquidity Constraint, And Monetary Policy: Evidence From Japanese Manufacturing Firm Panel Data. Japan And The World Economy, 33, 11-19.10.1016/j.japwor.2015.01.001
Search in Google Scholar Back to article
Mishkin, S., F. (1996). The Channels Of Monetary Transmission: Lessons For Monetary Policy. (Nber Working Papers Series, No. 5464), National Bureau Of Economic Research, Inc.10.3386/w5464
Search in Google Scholar Back to article
Mizen, P., & Yalcin, C. (2002). Corporate Finance When Monetary Policy Tightens (Working Papers, No. 03-18). University Of Nottingham.
Search in Google Scholar Back to article
Mulier, K., Schoors, K. & Merlevede, B. (2016). Investment-Cash Flow Sensitivity And Financial Constraints: Evidence From Unquoted European Smes. Journal Of Banking & Finance, 73, 182-197. Doi: 10.1016/J.Jbankfin.2016.09.00210.1016/J.Jbankfin.2016.09.002
Open DOI Search in Google Scholar Back to article
Nagahata, T., & Sekine, T. (2005). Firm Investment, Monetary Transmission And Balance-Sheet Problems In Japan: An Investigation Using Micro Data. Japan And The World Economy, 17, 345-369. Doi: 10.1016/J.Japwor.2004.03.00410.1016/J.Japwor.2004.03.004
Open DOI Search in Google Scholar Back to article
Oesterreichische Nationalbank (2018). How Monetary Policy Works. Available At: Https://Www.Oenb.At/En/Monetary-Policy/How-Monetary-Policy-Works.Html.
Search in Google Scholar Back to article
Ogawa, K. (2000). Monetary Policy, Credit, And Real Activity: Evidence From The Balance Sheet Of Japanese Firms. Journal Of The Japanese And International Economies, 14, 385-407.10.1006/jjie.2000.0455
Search in Google Scholar Back to article
Richardson, S. (2006). Over-Investment Of Free Cash Flow. Review Of Accounting Studies, 11(2), 159-189. Doi: 10.1007/S11142-006-9012-110.1007/S11142-006-9012-1
Open DOI Search in Google Scholar Back to article
Vithessonthi, C., Schwaninger, M. & Müller, M.O. (2017). Monetary Policy, Bank Lending And Corporate Investment. International Review Of Financial Analysis, 50, 129-142. Doi: 10.1016/J.Irfa.2017.02.00710.1016/J.Irfa.2017.02.007
Open DOI Search in Google Scholar Back to article
Wooldridge, J. M. (2002). Introductory Econometrics: A Modern Approach. U.S.: Cengage South-Western.
Search in Google Scholar Back to article
Yang, X., Han, L., Li, W., Yin, X. & Tian, L. (2017). Monetary Policy, Cash Holding And Corporate Investment: Evidence From China. China Economic Review, 46, 110-122. Doi: 10.1016/J.Chieco.2017.09.001.10.1016/J.Chieco.2017.09.001
Open DOI Search in Google Scholar Back to article

Loose Monetary Policy and Corporate Investment of Manufacturing Firms in the Czech Republic

Abstract

Paradigm

My account