Quantitative Easing and Corporate Innovation

The scars of supply shocks: Implications for monetary policy

“…By triggering this vicious spiral, a tight monetary stance may thus depress both employment and productivity. This feature of the model is consistent with recent empirical evidence by Garga and Singh (2020), Moran and Queraltó (2018), Jordà et al (2020) and Grimm et al (2022), suggesting that monetary policy tightenings have a negative impact on investment in innovation and productivity growth.…”

“…In particular, a tighter monetary stance leads to a slowdown in investment in innovation and productivity growth. This feature of the model is consistent with a growing body of empirical evidence (Garga and Singh, 2020;Moran and Queraltó, 2018;Jordà et al, 2020;Grimm et al, 2022), suggesting that monetary policy tightenings induce firms to cut investment 24 Notice that ḡ = β(χ L + η). The denominator can thus be written as…”

Financial Markets and Green Innovation

“…Goetz (2019) shows that the Fed's QE program led firms to reduce pollution by reducing their cost of funding and allowing them to purchase abatement technologies. Grimm, Laeven, and Popov (2021) show that by subsidizing the cost of debt for innovative firms with low levels of debt funding, the ECB's CSPP program has stimulated corporate innovation. To extent that these effects are symmetric, an increase in the cost of funding for some high-carbon firms generated by their exclusion from the CSPP portfolio may lead them to reduce green innovation and to adopt cheaper, more carbon-intensive technologies.…”

Financial Markets and Green Innovation

“…Goetz (2019) shows that the Fed's QE program led firms to reduce pollution by reducing their cost of funding and allowing them to purchase abatement technologies. Grimm, Laeven, and Popov (2021) show that by subsidizing the cost of debt for innovative firms with low levels of debt funding, the ECB's CSPP program has stimulated corporate innovation. To the extent that these effects are symmetric, an increase in the cost of funding for some high-carbon firms generated by their exclusion from the CSPP portfolio may lead them to reduce green innovation and to adopt cheaper, more carbon-intensive technologies.…”