Progress and Excellence Research

Progress and Excellence Research

Analysis of the Financial Implications of Central Bank Monetary Policies on Investment Decision-Making in Economic Firms

Document Type : Original Article

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Abstract
This study analyzes the financial implications of central bank monetary policies on investment decision-making in economic firms using a review-analytical approach. Monetary policy, through instruments such as interest rates, open market operations, and reserve requirements, plays a crucial role in determining financing costs, investment risk, and liquidity conditions of firms.Changes in these policies can directly influence firms’ financial incentives and capacity for investment, thereby affecting economic growth and macroeconomic stability. The findings indicate that expansionary monetary policies, by lowering interest rates and increasing liquidity, stimulate investment and reduce financial risk for firms, whereas contractionary policies have the opposite effect.Moreover, firms’ sensitivity to monetary policy changes varies depending on their size, type of activity, and market conditions, highlighting the need for tailored and well-coordinated macroeconomic policy design. In addition, the study shows that the transmission of monetary policy effects through parallel markets (stocks, foreign exchange, gold, and real estate) plays an important role, which has also been confirmed in case studies.
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