Monetary Policy and Intangible Investment

55 Pages Posted: 17 Jul 2020

See all articles by Robin Döttling

Robin Döttling

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM)

Multiple version iconThere are 2 versions of this paper

Date Written: July, 2020

Abstract

We contrast how monetary policy affects intangible relative to tangible investment. We document that the stock prices of firms with more intangible assets react less to monetary policy shocks, as identified from Fed Funds futures movements around FOMC announcements. Consistent with the stock price results, instrumental variable local projections confirm that the total investment in firms with more intangible assets responds less to monetary policy, and that intangible investment responds less to monetary policy compared to tangible investment. We identify two mechanisms behind these results. First, firms with intangible assets use less collateral, and therefore respond less to the credit channel of monetary policy. Second, intangible assets have higher depreciation rates, so interest rate changes affect their user cost of capital relatively less.

JEL Classification: E22, E52, G32

Suggested Citation

Döttling, Robin, Monetary Policy and Intangible Investment (July, 2020). ECB Working Paper No. 20202444, Available at SSRN: https://ssrn.com/abstract=3654148 or http://dx.doi.org/10.2139/ssrn.3654148

Robin Döttling (Contact Author)

Rotterdam School of Management, Erasmus University ( email )

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Erasmus Research Institute of Management (ERIM) ( email )

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3000 DR Rotterdam
Netherlands

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