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CNB > Economic research > Research publications > CNB Working paper series > 2014 > The Impact of Monetary Policy on Financing of Czech Firms

The Impact of Monetary Policy on Financing of Czech Firms

Ruslan Aliyev, Dana Hájková, Ivana Kubicová

This paper uses firm-level financial data for Czech firms and tests for the role of companies’ financial structure in the transmission of monetary policy. Our results indicate that higher short-term interest rates coincide with lower shares of total debt, short-term bank loans, and long-term debt. We find that firm-specific characteristics, such as size, age, collateral, and profit, affect the way in which monetary policy changes are reflected in the external financing decisions of firms. These findings indicate the presence of informational frictions in credit markets and hence provide some empirical evidence of the existence of broad credit and relationship lending channels in the Czech Republic.

JEL codes: E44, E51, E52, G21, G32

Keywords: Credit channel, Czech Republic, external finance, monetary policy transmission

Issued: June 2014

Download: CNB WP 5/2014 (pdf, 989 kB)