Real Effects of Unconventional Monetary Policy 

Abstract

This paper investigates the real effects of unconventional monetary policy on firms' R&D investment and product market competitiveness. We exploit a quasi-natural experiment, in which the ECB via its Corporate Sector Purchase Programme (CSPP), quasi randomly purchases firms' bonds. By focusing on firms whose bonds are eligible to the CSPP, we show that as a result of reduced funding costs, firms whose bonds were purchased invest more into R&D. We provide evidence that runner-ups in product market competition are the main beneficiaries of the reduced funding costs.

Keywords: Monetary policy, central banking, R&D, product market competition