{ "title": "A Tale of Two Margins: Monetary Policy and Capital Misallocation", "publication": "IMF Working Papers, June 14, 2024", "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2024/06/14/a-tale-of-two-margins-monetary-policy-and-capital-misallocation-550533", "canonical": "https://www.imf.org/en/publications/wp/issues/2024/06/14/a-tale-of-two-margins-monetary-policy-and-capital-misallocation-550533", "overlayPath": "/en/publications/wp/issues/2024/06/14/a-tale-of-two-margins-monetary-policy-and-capital-misallocation-550533/index.md", "summary": "This paper investigates the impact of monetary policy on capital misallocation, focusing on its heterogeneous effects on firms.", "sections": [ { "heading": "Summary", "content": "- Paper investigates the impact of monetary policy on capital misallocation and its heterogeneous effects on firms.\n- Uses Spanish firm-level data spanning 1999 to 2019.\n- Finds that expansionary monetary policy leads to a reduction in capital misallocation, measured by the within-industry dispersion of firms’ marginal revenue product of capital (MRPK).\n- Authors: Silvia Albrizio, Beatriz Gonzalez, Dmitry Khametshin.\n- Publication date: June 14, 2024.\n- Series: Working Paper No. 2024/121; Issue: 121; Pages: 62.\n- DOI: https://doi.org/10.5089/9798400279881.001\n- ISBN: 9798400279881; ISSN: 1018-5941." }, { "heading": "Key findings", "content": "- Expansionary monetary policy reduces capital misallocation as measured by within-industry dispersion of firms’ MRPK.\n- Intensive margin:\n - High-MRPK firms exhibit a greater increase in investment following a monetary policy easing surprise.\n - High-MRPK firms exhibit a greater increase in debt financing relative to low-MRPK firms following a monetary policy easing surprise.\n - A firm’s MRPK is a stronger determinant of its investment sensitivity to monetary policy than age, leverage, or cash.\n - MRPK is a reliable proxy for financial frictions.\n- Extensive margin:\n - Monetary policy easing stimulates entry and discourages exit, although the quantitative impact is small.\n - No significant changes in the composition of high- and low-MRPK entrants or exiters were found.\n- Overall conclusion: Expansionary monetary policy primarily reduces capital misallocation by alleviating financial frictions among incumbent productive and constrained firms." }, { "heading": "Mechanisms and interpretation", "content": "- Intensive margin channel: Differential responses in investment and debt financing across firms sorted by MRPK lead to reallocation of capital toward higher-MRPK firms within industries.\n- Extensive margin channel: Entry increases and exit decreases with monetary easing, but these effects are quantitatively small and do not alter the MRPK composition of entrants and exiters.\n- Financial frictions interpretation: MRPK captures firms’ constraints; monetary easing relaxes financing constraints for productive incumbents, driving most of the misallocation reduction." }, { "heading": "Scope, subject tags, and keywords", "content": "- Geographic focus: Spain (Spanish firm-level data).\n- Time coverage: 1999 to 2019.\n- Subjects: Economic theory, Financial frictions, Labor, Monetary expansion, Monetary policy, Monetary stance, Unemployment rate.\n- Keywords: B monetary policy, effects of monetary policy, financial frictions, Global, investment, misallocation, Monetary expansion, monetary policy, monetary policy easing, monetary policy shock, Monetary stance, MRPK firm, productivity, Unemployment rate." }, { "heading": "Publication metadata", "content": "- Publication type: IMF Working Papers.\n- Series and identifiers:\n - Working Paper No. 2024/121\n - Issue: 121\n - Pages: 62\n - DOI: https://doi.org/10.5089/9798400279881.001\n - ISBN: 9798400279881\n - ISSN: 1018-5941\n\nSource: A Tale of Two Margins: Monetary Policy and Capital Misallocation — IMF Working Papers, June 14, 2024.\n\n---\n\n Content in this bundle\n\n- Working Paper\n - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2024/06/14/a-tale-of-two-margins-monetary-policy-and-capital-misallocation-550533" } ], "bullets": [ "[Markdown version](/en/publications/wp/issues/2024/06/14/a-tale-of-two-margins-monetary-policy-and-capital-misallocation-550533/index.md)", "[Structured JSON version](/en/publications/wp/issues/2024/06/14/a-tale-of-two-margins-monetary-policy-and-capital-misallocation-550533/index.json)", "[Bundle manifest](/en/publications/wp/issues/2024/06/14/a-tale-of-two-margins-monetary-policy-and-capital-misallocation-550533/bundle-manifest.json)", "Authors: Silvia Albrizio, Beatriz Gonzalez, Dmitry Khametshin", "Published: June 14, 2024", "Series: IMF Working Papers", "DOI: https://doi.org/10.5089/9798400279881.001", "Paper investigates the impact of monetary policy on capital misallocation and its heterogeneous effects on firms.", "Uses Spanish firm-level data spanning 1999 to 2019.", "Finds that expansionary monetary policy leads to a reduction in capital misallocation, measured by the within-industry dispersion of firms’ marginal revenue product of capital (MRPK).", "Authors: Silvia Albrizio, Beatriz Gonzalez, Dmitry Khametshin.", "Publication date: June 14, 2024.", "Series: Working Paper No. 2024/121; Issue: 121; Pages: 62.", "DOI: https://doi.org/10.5089/9798400279881.001", "ISBN: 9798400279881; ISSN: 1018-5941.", "Expansionary monetary policy reduces capital misallocation as measured by within-industry dispersion of firms’ MRPK.", "Intensive margin:", "Extensive margin:", "Overall conclusion: Expansionary monetary policy primarily reduces capital misallocation by alleviating financial frictions among incumbent productive and constrained firms.", "Intensive margin channel: Differential responses in investment and debt financing across firms sorted by MRPK lead to reallocation of capital toward higher-MRPK firms within industries.", "Extensive margin channel: Entry increases and exit decreases with monetary easing, but these effects are quantitatively small and do not alter the MRPK composition of entrants and exiters.", "Financial frictions interpretation: MRPK captures firms’ constraints; monetary easing relaxes financing constraints for productive incumbents, driving most of the misallocation reduction.", "Geographic focus: Spain (Spanish firm-level data).", "Time coverage: 1999 to 2019.", "Subjects: Economic theory, Financial frictions, Labor, Monetary expansion, Monetary policy, Monetary stance, Unemployment rate.", "Keywords: B monetary policy, effects of monetary policy, financial frictions, Global, investment, misallocation, Monetary expansion, monetary policy, monetary policy easing, monetary policy shock, Monetary stance, MRPK firm, productivity, Unemployment rate.", "Publication type: IMF Working Papers.", "Series and identifiers:", "**Working Paper**" ], "related": [ { "title": "Working Paper", "role": "paper", "sourceUrl": "https://www.imf.org/-/media/files/publications/wp/2024/english/wpiea2024121-print-pdf.pdf", "summary": { "path": "/-/media/files/publications/wp/2024/english/wpiea2024121-print-pdf.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/wp/2024/english/wpiea2024121-print-pdf.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/publications/wp/issues/2024/06/14/a-tale-of-two-margins-monetary-policy-and-capital-misallocation-550533/index.md", "json": "/en/publications/wp/issues/2024/06/14/a-tale-of-two-margins-monetary-policy-and-capital-misallocation-550533/index.json", "bundleManifest": "/en/publications/wp/issues/2024/06/14/a-tale-of-two-margins-monetary-policy-and-capital-misallocation-550533/bundle-manifest.json" }, "generatedAtUtc": "2026-09-17T00:09:18.919Z" }