Abstract
This study examines the dynamic effects of monetary policy on investment of non-listed real sector firms in China. We employ proxy vector autoregression analyses to extract China's monetary policy surprises and use firm-level data to investigate the dynamic effects of monetary policy. Empirical findings show that unanticipated expansionary monetary policy prompts investment of China's non-listed real sector firms in the first year of monetary policy surprises but has no positive accumulative effect on investment in the fourth year, suggesting that monetary easing shifts firms' investment to an early date rather than increases investment permanently. Group-division results present discrepancies between state-owned and private firms and among firms with different sizes. Further analysis provides evidence that the effect of monetary policy on non-listed firms' investment relates to external finance rather than investment opportunities.
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