DP3191 Monetary Policy in an Open Economy: The Differential Impact on Exporting and Non-Exporting Firms

Author(s): Hedva Ber, Asher Blass, Oved Yosha
Publication Date: February 2002
Keyword(s): corporate finance, interest rate, investment, leverage, liquidity, publicly traded firms, Tobin's q
JEL(s): D20, E44
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3191

Using firm-level data, we provide evidence that, although monetary policy affects real investment, the effect operates differentially: the greater its export intensity the less a firm is affected by tight money. We examine several interpretations and conclude that the impact is transmitted primarily through the supply side due to differential access to credit markets. This finding lends support to the commonplace view that monetary policy is less effective the more open the economy.