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2019 | OriginalPaper | Buchkapitel

33. Does an Increase in the Value of Companies’ Cash Holdings Impact the Transmission of Expansionary Monetary Policy Shocks? Counterfactual Policy Analysis

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Abstract

Evidence indicates that expansionary monetary policy shocks raise credit growth more than the counterfactual suggests in the low economic policy uncertainty regime. This suggests that, in the low economic policy uncertainty environment, the slowdown in the companies’ deposits growth due to an expansionary monetary policy shock amplifies the increases in the credit growth. By contrast, an expansionary monetary policy shock raises credit growth less than the counterfactual in the high uncertainty regime. This is due to an increase in the growth of companies’ deposits in the high uncertainty regime, which dampens credit growth. The multiplier mechanism in the credit creation based on deposits is weakened in the high economic policy uncertainty periods and this weakens the stimulatory effects of expansionary monetary policy shocks.

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Fußnoten
1
This slowdown in growth in gross capital formation is consistent with predictions of the real option theory in which increased uncertainty, make agents to be cautious and adopt a “wait and see approach”.
 
Literatur
Zurück zum Zitat Baum, C. F., Caglayan, M., & Ozkan, N. (2002). The impact of macroeconomic uncertainty on bank lending behavior (Computing in Economics and Finance 94). Society for Computational Economics. Baum, C. F., Caglayan, M., & Ozkan, N. (2002). The impact of macroeconomic uncertainty on bank lending behavior (Computing in Economics and Finance 94). Society for Computational Economics.
Zurück zum Zitat Bloom, N. (2009). The impact of uncertainty shocks. Econometrica, 77(3), 623–685.CrossRef Bloom, N. (2009). The impact of uncertainty shocks. Econometrica, 77(3), 623–685.CrossRef
Zurück zum Zitat Hlatshwayo, S., & Saxegaard, M. (2016). The consequences of policy uncertainty: Disconnects and dilutions in the South African real effective exchange rate-export relationship (IMF Working Chapter WP/16/113). Hlatshwayo, S., & Saxegaard, M. (2016). The consequences of policy uncertainty: Disconnects and dilutions in the South African real effective exchange rate-export relationship (IMF Working Chapter WP/16/113).
Zurück zum Zitat Im, H. J., Park, H., & Zhao, G. (2017). Uncertainty and the value of cash holdings. Economics Letters, 155, 43–48.CrossRef Im, H. J., Park, H., & Zhao, G. (2017). Uncertainty and the value of cash holdings. Economics Letters, 155, 43–48.CrossRef
Metadaten
Titel
Does an Increase in the Value of Companies’ Cash Holdings Impact the Transmission of Expansionary Monetary Policy Shocks? Counterfactual Policy Analysis
verfasst von
Eliphas Ndou
Thabo Mokoena
Copyright-Jahr
2019
DOI
https://doi.org/10.1007/978-3-030-19803-9_33