Firm-level investment and monetary policy in Malaysia: do the interest rate and broad credit channels matter?

Zulkefly Abdul Karim, W. N W Azman-Saini

Research output: Contribution to journalArticle

13 Citations (Scopus)

Abstract

This paper examines the effects of monetary policy on investment spending in Malaysia for 1990-2008 using firm-level data. The focal point of this paper is two main channels of monetary policy transmission mechanism, namely, the interest rate and broad credit channels. Using a dynamic neoclassical investment function, empirical results based on system generalised method of moments (GMM) estimations and a sample of 419 firms support the relevance of both interest rate and broad credit channels in influencing investment spending. The results also reveal that the effect of monetary policy channels on firm investment is heterogeneous, such that small firms (i.e. credit-constrained firms) are more responsive to monetary tightening when compared to large firms (i.e. less constrained firms).

Original languageEnglish
Pages (from-to)396-412
Number of pages17
JournalJournal of the Asia Pacific Economy
Volume18
Issue number3
DOIs
Publication statusPublished - 2013

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investment policy
monetary policy
interest rate
Malaysia
credit
firm

Keywords

  • dynamic panel data
  • financial constraint
  • firm investment
  • monetary policy
  • system GMM

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Development
  • Political Science and International Relations

Cite this

Firm-level investment and monetary policy in Malaysia : do the interest rate and broad credit channels matter? / Abdul Karim, Zulkefly; Azman-Saini, W. N W.

In: Journal of the Asia Pacific Economy, Vol. 18, No. 3, 2013, p. 396-412.

Research output: Contribution to journalArticle

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