Monetary policy and industrial investment: A review of few studies

Monetary policy is a means with which the central bank keeping in mind its objectives influences various sectors of the economy by affecting cost and supply of money through various quantitative and qualitative tools in its arsenal. Industrial sector for the economy plays a major role for growth as well as supply of goods to control inflation. This sector occupies important place because of its employment potential and forward as well as backward linkages. A preliminary look at Repo rate, bank interest rate and industrial investment in India shows that they move in the same direction albeit with a lag. A review of both national as well international studies also corroborate about industry effects of monetary policy. It is also pertinent to mention that this effect is further different on the basis of size and funding patterns of the firm. The effect is also asymmetrical, more pronounced during recessions than during booms.