Monetary policy and corporate investment: evidence from India

Purpose This study aims to investigate the impact of quantity-based and price-based monetary policy on corporate investment in India. Also the study investigates the impact of firm-level factors on corporate investment under quantity-based and price-based monetary policy. Design/methodology/approach The study is based on sample of 3,782 non-financial Indian firms (45,238 observations) and the data has been collected for a period 2000–2023. The study applies instrument variable approach to arrive at the results. Findings The study finds that both quantity-based and price-based monetary policy significantly affects corporate investment of firms and the transmission of monetary policy to corporate investment is constrained by firm-specific factors. This paper find that firm-specific factors play a significant role in transmitting the effects of both quantity-based as well as price-based monetary policy respectively and such results have also been witnessed across manufacturing and non-manufacturing sectors. Originality/value To the best of the authors’ knowledge, this is the first study in the Indian context that examines the impact of quantity-based and price-based monetary policy on corporate investment.