Monetary policy less effective in uncertain times for corporate investments.
The article explores how changes in monetary policy affect companies' investment decisions during uncertain times. The researchers studied US public firms from 2000 to 2019 and found that when uncertainty is high, traditional ways of influencing investment through policy rates don't work as well. They also discovered that certain types of companies, like those with less flexibility or in less innovative industries, are less likely to adjust their investments in response to monetary policy changes. To make monetary policy more effective, policymakers should focus on reducing uncertainty and target sectors that are most sensitive to policy changes.