Leverage, monetary policy, and firm investment
Abstract: In this paper, I investigate whether the effects of monetary policy on firm investment can be transmitted through leverage. I find that monetary contractions reduce the growth of investment more for highly leveraged firms than for less leveraged firms. The results suggest that the board credit channel for monetary policy exists, and that it can operate through leverage, as adverse monetary shocks aggravate real debt burdens and raise the effective costs of investment.
File(s): File format is application/pdf http://www.frbsf.org/econrsrch/econrev/99-2/32-39.pdf
Provider: Federal Reserve Bank of San Francisco
Part of Series: Economic Review
Publication Date: 1999
Order Number: 2