Research On The Impact Of Monetary Policy Uncertainty On Enterprise Investment

After the global financial crisis in 2008,the global economy suffered heavy losses.Developed economies made a series of monetary policy adjustments,including rapid adjustment of interest rates,implementation of quantitative easing policy,withdrawal from quantitative easing policy,etc.China is facing more and more internal and external challenges,the economic situation is complex,and China’s monetary policy in this period of time the frequency of adjustment increased,the People’s Bank of China implemented a series of new policies,including relaxing credit,adjusting the statutory deposit reserve ratio and interest rate,and creating structural monetary policy tools such as targeted reserve requirement reduction,refinancing,standing lending facilities,mortgage supplementary loans,and the inclusive credit loan support plan for weak enterprises.At the beginning of 2020,the Novel Coronavirus pandemic is sweeping the country with a huge impact on social and economic development.Countries have adjusted their monetary policies in a timely manner.China has taken comprehensive measures to deal with the impact,such as reducing reserve requirements,interest rates,refinancing and rediscount,and introducing epidemic prevention and control and enterprises’ resumption of work and production.In the transition stage,China’s policies need to take into account multiple objectives at the same time,while promoting economic growth,but also to ensure financial security and prevent systemic financial risks.The uncertainty of macroeconomic situation,the diversity of objectives and the inconsistency between objectives are the important reasons for the frequent adjustment of monetary policy,resulting in the rising uncertainty of monetary policy.At the same time,Although the development environment of Chinese companies is being optimized in many aspects,there are still many imperfections in many aspects.The stability of investment is weakened,such as the vitality of enterprises is reduced,the fluctuation of investment growth rate is increased,the investment demand is declining rapidly,the willingness of enterprises to invest is not strong,and the investment structure does not meet the requirements of China’s high-quality development.Is the uncertainty of monetary policy an important potential influencing factor on enterprise investment? As an important decision of enterprise management,enterprise investment is the main influence factor of enterprise growth and an important part of economic growth.Under the background of increasing uncertainty of monetary policy,it has certain research value to investigate the uncertainty of China’s monetary policy for enterprises’ investment activities.Starting from the realistic background that China’s monetary policy uncertainty and enterprise investment have been widely concerned,On the basis of fully learning and absorbing previous research results,this paper studies the impact of monetary policy uncertainty on enterprise investment,and reveals the impact of changes in external monetary policy environment on micro enterprise behavior.Banks are the hub connecting monetary policy and micro market players.Banks are the most important financial institutions in China,providing capital sources for many enterprises,reasonably assuming risks,providing credit and realizing the growth of enterprise investment.Banks are significantly more sensitive to the uncertainty and volatility of monetary policy than other market players.The increasing uncertainty of monetary policy indicates that it is more difficult for market subjects to predict the changes and trends of monetary policy.Banks are not risk neutral.Banks’ perception of external risks,risk preference and risk-taking behavior will change with the increase of monetary policy uncertainty,which will lead to the adjustment of credit policy,credit conditions and credit supply,and then have an important impact on enterprise investment.The impact of the rising uncertainty of monetary policy on the risk-taking behavior of banks,an intermediate transmission channel,will eventually be reflected in the investment decision-making behavior of enterprises.The existing literatures pay attention to the research of monetary policy horizontal shock(first-order moment),and the research on the impact of monetary policy uncertainty shock(second-order moment)is not enough;At present,the research results focus more on the impact of general economic policy uncertainty on enterprise investment,and the research on monetary policy uncertainty,a specific type of policy uncertainty,is still relatively scarce;The discussion on the economic effect of monetary policy uncertainty mainly focuses on the macro economy,focusing on the aggregate impact,while there are few literatures about the impact of monetary policy uncertainty on the decision-making of market players;The transmission mechanism and influence way of monetary policy uncertainty affecting the behavior of micro subjects are not clear,and the response and role of risk appetite and risk-taking behavior of banks,which are important subjects of credit supply,are less considered.In view of the deficiencies in the above research,Based on the reality of China’s bank-dominated financial system,this paper carries out the logical analysis sequence of monetary policy,bank risk-taking and enterprise investment behavior.From the perspective of bank’s on-balance sheet risk taking and off-balance sheet risk taking,this paper discusses the concrete effect of China’s monetary policy uncertainty on enterprise investment behavior,and discusses how the uncertainty caused by frequent adjustment of monetary policy affects bank risk-taking behavior,and then affects the investment activities of micro enterprises and the real economy.The basic impact of monetary policy uncertainty on enterprise investment,monetary policy uncertainty affects the existence of bank risk taking channel of enterprise investment,the difference between different types of enterprises,and the moderating effect of this channel by bank capital adequacy ratio and bank liquidity level.The main conclusions are as follows.(1)In general,the impact of monetary policy uncertainty on enterprise investment is investigated.It is found that the increase of monetary policy uncertainty inhibits enterprise investment and has a differentiated impact on different types of enterprise investment.The increase of monetary policy uncertainty reduces enterprise fixed asset investment and improves enterprise current asset investment,resulting in a structural impact.(2)There are not only on balance sheet risk bearing transmission channels,but also off balance sheet risk bearing transmission channels.When the uncertainty of monetary policy changes,the change of bank risk-taking is not only reflected in the adjustment of traditional on balance sheet businesses,but also reflected in the adjustment of off balance sheet shadow banks.The increase of monetary policy uncertainty reduces enterprise investment by reducing the level of on balance sheet risk-taking and off balance sheet risk-taking of banks.The on balance sheet and off balance sheet risk-taking of banks presents a certain risk aversion feature.(3)The influence of monetary policy uncertainty on the investment of enterprises with different characteristics is different through the channel of bank risk-taking.Specifically,Increased monetary policy uncertainty has a greater impact on non-state-owned enterprises and younger firms through the bank risk taking channel.(4)The effect of banks’ risk-bearing channels with monetary policy uncertainty is moderated by the index of banks’ risk-bearing capacity.A higher bank capital adequacy ratio and liquidity level can alleviate the effect of the uncertainty of monetary policy on the reduction of banks’ risk-taking level,thus inhibiting the decline of enterprises’ investment.The marginal contribution and possible innovation of this paper are as follows.(1)From the perspective of on balance sheet and off balance sheet risk-taking of banks,this paper clarifies the internal mechanism and transmission channels of the impact of monetary policy uncertainty on the investment behavior of micro enterprises,and provides an analytical structure for understanding and observing how monetary policy uncertainty affects the real economy,It is helpful to understand the impact of monetary policy uncertainty on micro individuals(2)provide new evidence that monetary policy uncertainty affects the real economy from the micro enterprise level.At present,the discussion on the economic effects of monetary policy uncertainty mainly focuses on the macro-economy,focusing on the total impact,lacking the micro basic research on the macro impact,and the research on the behavior impact of micro subjects is relatively scarce.The research in this paper helps to enhance the understanding of the micro mechanism of the impact of monetary policy uncertainty,and expand the research on the microeconomic effects of monetary policy uncertainty.(3)Studying how monetary policy uncertainty affects enterprises with different characteristics through on balance sheet and off balance sheet channels can deepen the understanding of the impact of monetary policy uncertainty on Enterprise Investment under different conditions and situations,and provide a new perspective for understanding the microeconomic effects of monetary policy uncertainty.(4)From the perspective of bank characteristics,this paper studies the impact of bank risk taking transmission channel of monetary policy uncertainty,and focuses on the role of bank characteristics in transmission channel,which is helpful to better understand and grasp the impact of bank risk-taking transmission channel.In a word,the research of this paper has certain reference value for the improvement of monetary policy making and the realization of "stable investment" under the downward pressure of the economy.Monetary policy uncertainty is the potential cost of macro-control.In order to achieve better effects of monetary policy,the monetary authorities need to reasonably control the frequency of monetary policy adjustment when implementing monetary policy and reduce the uncertainty caused by frequent monetary policy as much as possible,reduce the potential cost of monetary policy changes as far as possible,and grasp the transmission channel and impact mechanism of monetary policy uncertainty affecting microeconomic subjects.The research shows that the Central Bank of China should improve the effect of monetary policy,dredge the transmission mechanism of monetary policy,and boost the realization of "six stabilities" goals such as "stable investment" and "stable expectation".It is necessary to pay attention to the impact of monetary policy uncertainty on enterprise investment through the intermediate transmission channel of bank risk bearing,so as to improve enterprise investment and promote the healthy development of the real economy.