DP17280 Quantitative Easing and Corporate Innovation

Author(s):	Niklas Grimm, Luc Laeven, Alexander Popov
Publication Date:	May 2022
Date Revised:	May 2022
Keyword(s):	asset purchases, Corporate innovation, Real effects, Unconventional Monetary Policy
JEL(s):	E5, G10, O3
Programme Areas:	Monetary Economics and Fluctuations
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=17280

We document a strong and heterogeneous response of corporate R&D investment to changes in debt financing conditions induced by corporate debt purchases under the ECB's QE Program. Companies eligible for the program increase significantly their investment in R&D, relative to similar ineligible companies operating in the same country and sector. This effect is limited to firms with low leverage and with high levels of prior innovation. In contrast, QE-eligible companies with no history of innovation only increase dividend payments. Finally, credit constraints do not appear to matter for the response of R&D investment to QE.