Firm-Level Data and Monetary Policy: The Case of a Middle Income Country

IMF Working Papers, November 1, 2019

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Canonical URL: Firm-Level Data and Monetary Policy: The Case of a Middle Income Country

Tests the existence of the balance sheet channel of monetary policy in a middle-income country.
Addresses challenges from firm-level data scarcity and quality that make identification of the channel difficult.
Uses panel instrumental variables estimation with measurement error to analyze firm financial statements.

Sample: financial statements of 58 500 Moroccan firms.
Period covered: 2010-2016.
Publication: IMF Working Papers, Working Paper No. 2019/239, Pages: 34, Volume: 2019, Issue: 239.
DOI: https://doi.org/10.5089/9781513518862.001
ISBN: 9781513518862
ISSN: 1018-5941

Estimation approach: panel instrumental variables estimation with measurement error.
Focus on firm-level balance sheets and financing variables to identify the balance sheet channel.

Confirms the existence of the balance sheet channel of monetary policy in the studied middle-income country.
Monetary policy has a significant impact on small and medium enterprises’ access to banks’ financing.
Firm-specific variables are key determinants of firms’ financing decisions.
Subject areas addressed: Banking, Collateral, Econometric analysis, Estimation techniques, External debt, Financial institutions, Financial statements, Loans, Public financial management (PFM), Trade credits.

Monetary policy transmission operates through firms’ balance sheets, with notable effects on small and medium enterprises’ bank financing access.
Improvements in firm-level data quality and coverage are important for accurately identifying and quantifying balance sheet channel effects.
Firm-specific characteristics should be taken into account when designing policies to support SME access to bank finance.

IMF Working Paper No. 2019/239 (Lahcen Bounader and Mohamed Doukali), November 1, 2019.