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The monetary policy implementation and corporate investment are closely intertwined. The aim of modern monetary policy is to mitigate economic fluctuations and stabilise economic growth. One of the ways of influencing the real economy is influencing the level of investment by enterprises.

This chapter provides evidence on how monetary policy affected corporate investment in Poland between 1Q 2000 and 3Q 2022. We investigate the impact of Polish monetary policy on investment outlays in contexts of high uncertainty.

Using the correlation analysis and the regression model, we show the relation between the monetary policy and the investment outlays of Polish enterprises. We used the least squares method as the most popular in linear model estimation. The evaluation includes model fit, independent variable significance and random component, i.e. constancy of variance, autocorrelation, alignment with normal distribution, along with Fisher–Snedecor test and Breusch–Pagan test.

We find that Polish enterprises are responsive to changes in monetary policy. Hence, the corporate investment level is correlated with the effects of monetary policy (especially with the decision on the central bank's basic interest rate changes). We found evidence that QE policy has a positive impact on Polish investment outlays. The corporate investment in Poland is positively affected by respective monetary policies through Narodowy Bank Polski (NBP) reference rate, inflation, corporate loans, weighted average interest rate on corporate loans.

Fiscal and monetary policies are essential to the development of a capital market. In this chapter, authors present how fiscal and monetary policy in Poland evolved and adjusted to economic challenges in 1998–2022. It is worth noticing that the Polish economy and financial market have been built from scratch after 45 years of socialism. Hence, it is scientifically interesting to study the relationship between fiscal and monetary policy, and capital market in a developing country, and in a relatively young economy.

Both – the macroeconomic policy mix and development of the capital market – are the subject of analysis how fiscal and monetary policy impacted the capital market. As so the main aim of the chapter is the assessment of the nexus and dependencies between fiscal and monetary policy and the capital market.

In the chapter, multiple linear regression was used for each dependent variable to discover which monetary and fiscal policy parameters significantly predicted selected variables describing the development of the capital market in Poland. Fiscal and monetary policy variables served as descriptors explaining capital market parameters in seven separate models.

Multiple regression models explain 77.3%–95.4% of the volatility of the capital market characteristics. The level of the central bank's reference rate is a variable that influences the capital market the most. In six out of seven models, the interest rate was a significant parameter. The development of the capital market was accompanied by a higher tax-to-GDP ratio. At the same time, a strong negative impact of the tax-to-GDP increase was noticed in domestic institutional investors' stock trading.

This study presents a systematic review of the literature on monetary policy and corporate investment together with bibliometric analysis.

This study selected 455 articles from databases, Scopus and Web of science and the papers are reviewed systematically to identify their theoretical and empirical contributions.

The results reveal that monetary policy can influence corporate investment. Post to the economic crisis (2008), there is an exponential growth in the number of publications. Berger, A., and Hubbard are the two prominent authors based on the highest citation score, whereas Marquez, R., and Vermuelen, P. are the two prolific authors, subject to their highest h-index. Journal of Banking & Finance was the top journal (total citations = 1482) and 5 publications.

This study positively contributes to the comprehensive understanding of corporate investment, monetary policy transmission and firm capital structure choices.

To the best of the author’s knowledge, this is the first study that conducts a systematic review of the influence of monetary policy on corporate investment.

Monetary policy has major impacts on macroeconomic indicators of the country. Accordingly, uncertainty regarding monetary policy shifts can cause challenges and risks for businesses, financial markets and investors. Thus, the purpose of this study is to investigate how real estate market volatility responds to monetary policy uncertainty.

The GARCH-MIDAS model is applied in this study to investigate the nexus between monetary policy uncertainty and real estate market volatility. This model was fundamentally instituted to accommodate low-frequency variables.

The results of this study reveal that increased monetary policy uncertainty highly affects the volatility in real estate market during the peak period of COVID-19 as compared to full sample period and COVID-19 recovery period; hence, a significant decline is evident in real estate market volatility during crisis.

This study is particularly focused on peak and recovery period of COVID-19 considering the geographical region of Greece, Japan and the USA. This study provides a complete perspective on the nexus between monetary policy uncertainty and real estate markets volatility in three distinct economic views.

For close to two decades, the West African Monetary Zone (WAMZ) has been preparing to launch a second monetary union within the ECOWAS region. This study aims to determine the impact such a unionised monetary regime will have on financial stability as represented by the nonperforming loan ratios of Ghana in a counterfactual framework.

This study models nonperforming loan ratios as dependent on the monetary policy rate and the business cycle. The study then used historical data to estimate the parameters of the nonperforming loan ratio response function using an Autoregressive Distributed Lag (ARDL) approach. The estimated parameters are further used to estimate the impact of several counterfactual unionised monetary policy rates on the nonperforming loan ratios and its volatility of Ghana. As robustness check, the Least Absolute Shrinkage Selection Operator (LASSO) regression is also used to estimate the nonperforming loan ratios response function and to predict nonperforming loans under the counterfactual unionised monetary policy rates.

The results of the counterfactual study reveals that the apparent cost of monetary unification is much less than supposed with a monetary union likely to dampen volatility in non-performing loans in Ghana. As such, the WAMZ members should increase the pace towards monetary unification.

The paper contributes to the existing literature by explicitly modelling nonperforming loan ratios as dependent on monetary policy and the business cycle. The study also settles the debate on the financial stability cost of a monetary union due to the nonalignment of business cycles and economic structures.

The study examines how the liquid assets holdings among non-financial Indian firms vary due to tightening monetary policy and increasing macroeconomic uncertainty.

The authors analyze 5,640 firms for the period 2011–2021. The authors first estimate India’s monetary policy shocks by decomposing the exogenous shocks from the systematic component of monetary policy changes. The authors then examine the effects of the estimated monetary policy shocks and a range of macroeconomic and policy uncertainty indicators on companies’ cash and bank balances to asset ratios using two-step system generalized method of moments (GMM) estimators.

The authors find that monetary policy shocks cause the cross-sectional variances for the firms’ liquidity holdings to increase. In anticipation of macroeconomic volatility, companies respond to these shocks after taking into account all the firm-level information to minimize the opportunity costs of holding extra cash or too few cash balances that can hamper firms’ operations. Furthermore, compared to other shocks, the contribution of inflation-induced shocks is predicted to be the largest in the cross-sectional deviation of the firm’s cash holdings. The authors also find that low-growth, older and financially constrained firms observe lesser heterogeneity in their cash holdings as they tend to hold cash as a precautionary buffer.

The authors’ approach to the analysis is unique in many ways. To address potential transmission bias, the authors use nowcasts and forecasts of real gross domestic product (GDP) growth and inflation to generate a series of exogenous monetary policy shocks for identifying unanticipated changes in short-term interest rates. Subsequently, the authors estimate how these shocks affect the cross-sectional deviation of liquid assets. For estimating the effects of macroeconomic uncertainty on corporate cash demand, the authors utilize a range of proxies for uncertainty. Unlike previous attempts, the authors offer evidence for a developing and fast-emerging economy.

This paper aims to achieve two goals: first, to evaluate the existing interest-free monetary policy tools in the major Islamic financial hubs of Malaysia, Pakistan and Bahrain and; second, to suggest how monetary policy tools in Turkey can be used in other countries.

This study follows a qualitative research method based on literature review, comparison, evaluation and design.

The policy rate cannot be used due to Shariah concerns. The reserve requirement depends on qard, and the reserves should be kept separately in the central bank. In terms of ijarah sukuk, Shariah concerns should be taken into account and a new structure, as displayed in Figure 3, should be followed. Government investment certificates can be used as an interest-free monetary policy tool. A genuine mudarabah interbank investments can also be used. Wadiah acceptance with no habitual gift can be used as well, and Tawarruq and central bank notes are not preferable due to Shariah concerns as well. Having said that, a Turkey-based tawarruq platform can be structured for others to use instead of applying to London.

This paper’s unique suggestion is to develop an interbank taqaruz market and a taqaruz method with the central bank. It is also unique for Turkey in the subject.

This study provides empirical evidence for the first time on how different measures of monetary policy affect banking profitability in Ghana.

Providing empirical evidence on how different measures of monetary policy affect banking profitability in Ghana using 29 banks for period between 2006 and 2016, new monetary indexes are developed and a robust panel random effect models is employed with year effect controls.

The results show that while increase in monetary policy basis point reduced banking profitability, average monetary policy rate stimulated banking profitability. Interestingly, the monetary policy basis point and rate indexes developed reduced and enhanced banking profitability, respectively. While these results may sound contradictory, they have both theoretical and empirical backing. Thus, basis point increments serve a monetary policy tightening condition which leads to higher loan prices, lower borrowing and declined profitability in the short run. However, in the long run, banks adjusted their loan prices and deposits to reflect basis point changes in their favor, hence the positive effect of average monetary policy rate on banking profitability. Additionally, monetary policy easing which represents decline in monetary policy basis point and rate enhances banking profitability.

These findings imply bank managers may take advantage of monetary policy easing to maximize profits in the banking sector of Ghana. Also, the monetary policy committee must be mindful of monetary policy tightening through basis point change since upward basis point increments reduce banking profitability.

This study provides empirical evidence for the first time on how different measures of monetary policy (developing indexes from monetary policy basis point and monetary policy rate) affect banking profitability in an emerging economy as Ghana.

The article aims to establish whether the degree of aversion to inflation and the responsiveness to deviations from potential output have changed over time.

This paper assesses time variation in monetary policy rules by applying a time-varying parameter generalised methods of moments (TVP-GMM) framework.

Using monthly data until December 2022 for five inflation targeting countries (the UK, Canada, Australia, New Zealand, Sweden) and five countries with alternative monetary regimes (the US, Japan, Denmark, the Euro Area, Switzerland), we find that monetary policy has become more averse to inflation and more responsive to the output gap in both sets of countries over time. In particular, there has been a clear shift in inflation targeting countries towards a more hawkish stance on inflation since the adoption of this regime and a greater response to both inflation and the output gap in most countries after the global financial crisis, which indicates a stronger reliance on monetary rules to stabilise the economy in recent years. It also appears that inflation targeting countries pay greater attention to the exchange rate pass-through channel when setting interest rates. Finally, monetary surprises do not seem to be an important determinant of the evolution over time of the Taylor rule parameters, which suggests a high degree of monetary policy transparency in the countries under examination.

It provides new evidence on changes over time in monetary policy rules.

The idea of this study is to provide a solid Financial Condition Index (FCI) that allows the monetary transmission policy to be monitored in a country which in recent decades has suffered from major financial and monetary crises.

The authors construct three FCIs for Mexico to analyse the role of financial asset prices in formulating monetary policy under an inflation-targeting regime. Using monthly data from 1995 to 2017, the authors estimate FCIs with two different methodologies and build the index by taking into account the mechanism of transmission of monetary policy and incorporating the most relevant financial variables.

This study’s results show that, likewise for developing countries as Mexico, an FCI could be a useful tool for managing monetary policy in reducing macroeconomic fluctuations.

Apart from building a predictor of possible financial stress, the authors construct an FCI for a central bank that pursues inflation targeting and to analyse the role of financial asset prices in formulating monetary policy.

1. We construct three FCIs for Mexico to analyse the role of financial asset prices in formulating monetary policy under an inflation-targeting regime.

2. The FCIs are based on (1) a vector autoregression model (VAR); (2) an autoregressive distributed lag model (ARDL) and (3) a factor-augmented vector autoregression model (FAVAR).

3. FCI could become a new target for monetary policy within a hybrid inflation-targeting framework.

4. FCI could be a good tool for managing monetary policy in developing countries with a low-inflation environment.

We construct three FCIs for Mexico to analyse the role of financial asset prices in formulating monetary policy under an inflation-targeting regime.

The FCIs are based on (1) a vector autoregression model (VAR); (2) an autoregressive distributed lag model (ARDL) and (3) a factor-augmented vector autoregression model (FAVAR).

FCI could become a new target for monetary policy within a hybrid inflation-targeting framework.

FCI could be a good tool for managing monetary policy in developing countries with a low-inflation environment.