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Does Monetary Policy Affect A Firm’s Investment Through Leverage? Micro Evidence for India

Author

Listed:
  • Ghosh, Saibal

    (Reserve Bank of India, Department of Economic Analysis and Policy)

  • Ghosh, Saurabh

    (Reserve Bank of India, Department of Economic Analysis and Policy)

Abstract

The paper investigates whether the effects of monetary policy on firm investment can be transmitted through leverage. The findings indicate that monetary contractions reduce investment for highly leveraged firms. The estimates imply that a 1 percentage point tightening of liquidity reduces investment by 0.4% through leverage.

Suggested Citation

  • Ghosh, Saibal & Ghosh, Saurabh, 2006. "Does Monetary Policy Affect A Firm’s Investment Through Leverage? Micro Evidence for India," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 59(1), pages 17-31.
    • Handle: RePEc:ris:ecoint:0089
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    References listed on IDEAS

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    Cited by:

    1. Saurabh Ghosh, 2014. "Volatility spillover in the foreign exchange market: the Indian experience," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 7(1), pages 175-194, March.
    2. Adiah Bailey & Victor Hernandez Martinez, 2023. "The Effect of Higher Financing Costs on Job Openings and Online Job Postings," Economic Commentary, Federal Reserve Bank of Cleveland, vol. 2023(09), pages 1-7, May.

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    More about this item

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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