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Does the Uncertainty of Monetary Policy Affect the Efficacy of Interest Rate Transmission Mechanisms? Micro-Evidence from the Investment-Capital Cost Sensitivity of Chinese Enterprises

Shenling Wang, Ling Jiang, Cai Chang
Vol.2, No.1, pp.66-83, 2024 DOI: 10.62051/ijgem.v2n1.09 January 28, 2024
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Abstract: The uncertainty of monetary policy, as a latent cost of monetary policy regulation, increasingly captures the attention of the theoretical community and policy authorities worldwide. Employing empirical analysis on data from China's A-share non-financial listed companies between 2003 and 2019, it is found that monetary policy uncertainty undermines corporate confidence in development, leading to a diminished enthusiasm for adjusting investment strategies in response to economic fluctuations. This hampers the sensitivity of corporate investment to capital costs, suggesting that monetary policy uncertainty impedes market entity decision-making, not only impairing the effectiveness of monetary policy interest rate transmission mechanisms but also reducing the efficiency of corporate investment. Mechanism tests indicate that corporate confidence in development plays a crucial role in investment decisions in uncertain economic environments.
Keywords: Interest Rate Transmission Mechanism, Monetary Policy Uncertainty, Corporate Investment, Capital Cost
APA Citation: Shenling Wang, Ling Jiang, Cai Chang (2024). Does the Uncertainty of Monetary Policy Affect the Efficacy of Interest Rate Transmission Mechanisms? Micro-Evidence from the Investment-Capital Cost Sensitivity of Chinese Enterprises. International Journal of Global Economics and Management, 2(1), 66-83. https://doi.org/10.62051/ijgem.v2n1.09

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