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Using LASSO-family models to estimate the impact of monetary policy on corporate investments

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  • Caraiani, Petre

Abstract

In this paper, I use LASSO-family models to select the relevant explanatory variables for the transmission of monetary policy shocks on investments and discuss the implications for the transmission mechanism of monetary policy. The results here point to the effect that Lasso techniques help select the relevant regressors. When the covariates are selected using this procedure, the impact of monetary policy shocks on corporate investments is about 20% lower than that for a baseline approach.

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  • Caraiani, Petre, 2022. "Using LASSO-family models to estimate the impact of monetary policy on corporate investments," Economics Letters, Elsevier, vol. 210(C).
    • Handle: RePEc:eee:ecolet:v:210:y:2022:i:c:s0165176521004420
    DOI: 10.1016/j.econlet.2021.110182
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    References listed on IDEAS

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    Cited by:

    1. Samer Adra & Elie Menassa, 2023. "Uncertainty and corporate investments in response to the Fed's dual shocks," The Financial Review, Eastern Finance Association, vol. 58(3), pages 463-484, August.

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    More about this item

    Keywords

    Monetary policy; Investment channel; Corporate finance; Firm-level data; Statistical learning; Lasso;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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