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Young Firms and Monetary Policy Transmission
Author:
Thomas McGregornull

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Series:
IMF Working Papers
Volume/Issue:
Volume 2021: Issue 063
Language:
English
Publication Date:
05 Mar 2021
DOI:
https://doi.org/10.5089/9781513571584.001
ISBN:
9781513571584
ISSN:
1018-5941
Pages:
64
Keywords:
firm demographics; business dynamism; monetary policy; local projections; U.S. states.; U.S. states; monetary policy shock; entry rate; population demographics; policy function; startup firm; exit rate; firm productivity; growth rate; Employment; Wages; Personal income; Credit ratings; Global
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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.
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We investigate the role of business dynamism in the transmission of monetary policy by exploitingthe variation in firm demographics across U.S. states. Using local projections, we find that a larger fraction of young firms significantly mutes the effects of monetary policy on the labor market and personal income over the medium term. The firm entry rate and the employment share of young firms are key factors underpinning these results, which are robust to a battery of robustness tests. We develop a heterogeneous-firm model with age-dependent financial frictions that rationalizes the empirical evidence.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2021: Issue 063