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- Title
The Balance Sheet Channel of Monetary Policy Transmission: Evidence from the United Kingdom.
- Authors
ANGELOPOULOU, ELENI; GIBSON, HEATHER D.
- Abstract
This paper examines the cash flow sensitivity of investment using a panel of UK manufacturing firms to investigate the existence of a balance sheet channel. In addition to examining the impact of cash flow in different subsamples based on company size or financial policy, we investigate the extent to which investment becomes more sensitive to cash flow in periods of monetary tightness by employing a narrative indicator constructed for the United Kingdom. The results indicate that cash flow sensitivity in financially constrained firms is higher during periods of tight monetary policy and that financial constraints weaken with financial market sophistication.
- Subjects
UNITED Kingdom; MANUFACTURING industries; INDUSTRIES; CASH management; LIQUIDITY (Economics); ECONOMIC indicators; FINANCIAL crises; MONETARY policy; FINANCIAL statements
- Publication
Economica, 2009, Vol 76, Issue 304, p675
- ISSN
0013-0427
- Publication type
Article
- DOI
10.1111/j.1468-0335.2008.00710.x