Monetary Policy, Financial Constraints And Corporate Debt Levels

In this paper, we study the influence of monetary policy on the level of corporate debt based on the heterogeneity of corporate financing constraints. This study found that with respect to the loose monetary policy in the period, enterprise in the period of tightening monetary policy significantly reduces the enterprise bank credit, and increase the enterprise’s commercial credit, while the total debt ratio decreased. In the loose monetary policy, comparing with the small financing constraints of enterprises, corporate with large financing constraints significantly increased less bank credit. While during the period of the tightening of monetary policy, comparing the enterprise with small financing constraints, the enterprise with large financing constraints decreased greater magnitude of the bank credit and therefore making enterprises with large financing constraints had to use the high cost of commercial credit. The results show that the credit transmission mechanism of monetary policy in our country did exist, but corporate with different financing constraints significantly influences the corporate debt levels and extent affected the effectiveness of monetary policy in our country. It shows that the financing constraints of large enterprises financing constraints have not been effectively eased in the loose monetary policy, while in the tightening of monetary policy, the reduction of money supply has significant influence on the enterprise with large financing constraints. This paper will take a new approach based on the practice of China’s monetary policy Taylor rule to fit the nominal target interest rate of monetary policy in China, in order to achieve the purpose of accurately dividing the range of monetary policy. At the same time, with the listing Corporation of our country as the sample, we construct a financing constraint index which is suitable for our country’s listing Corporation. The research evidence in this paper is helpful to evaluate the impact of macroeconomic policy on the micro entities from the perspective of corporate debt level adjustment, and to provide the basis and advice for policy makers to make appropriate economic policies.