Monetary Policy and Corporate Investment:Evidence from Chinese Micro Data

This paper investigates how a firm’s characteristics restrict the influence of monetary policy changes on its investment behavior.Focusing on China ’s listed companies for a sample period from the first quarter of 2002 to the first quarter of 2011,we find that quantityoriented and price-based monetary policies have heterogeneous impacts on corporate investment behavior,but the influence of monetary policies is constrained by the liquidity, inventory,size and asset-liability ratio of a firm.Firms with higher liquidity,lower inventory level and lower asset-liability ratios are less sensitive to the impact from two kinds of monetary policies.The larger the size of the firm,the less it is subject to influence from quantity-oriented monetary policy;it responds more to price-based monetary policy.The policy implication is that the monetary authorities should pay attention to the importance of policy-making based on the monetary demand of microeconomic entities.