IMF Working Papers

The Role of Corporate Cash Holdings in the Transmission of Monetary Policy Tightening

ByJaeBin Ahn, Euihyun Bae, Jing Zhou

November 22, 2024

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JaeBin Ahn, Euihyun Bae, and Jing Zhou. "The Role of Corporate Cash Holdings in the Transmission of Monetary Policy Tightening", IMF Working Papers 2024, 245 (2024), accessed 12/7/2025, https://doi.org/10.5089/9798400296321.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The U.S. economy has been exceeding expectations amid one of the most aggressive monetary policy tightening cycles. This paper provides firm-level evidence showing that abundant cash holdings enable firms to benefit from higher interest rates, thereby reducing net interest payments and mitigate the adverse impact from interest rate hikes to firms' investment and employment.

Subject: Capital spending, Employment, Expenditure, External debt, Income, Interest payments, Labor, Monetary policy, Monetary tightening, National accounts

Keywords: Capital spending, cash holding, Corporate cash, Employment, Global, Income, Interest expense, Interest income, Interest payments, Monetary policy transmission, Monetary tightening, Net interest payment, North America, tightening JaeBin Ahn

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