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8 years ago

Monetary policy hits hard on highly leveraged firms' investments.

Econometric Reviews
Leverage, monetary policy, and firm investment
Charles X. Hu

Paper Summary

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The study looked at how changes in monetary policy affect a company's investment decisions. They found that when the central bank tightens monetary policy, firms with high levels of debt cut back on their investments more than firms with lower debt levels. This suggests that monetary policy can impact investment decisions through a company's debt levels, making it harder for highly leveraged firms to invest when interest rates go up.