Is monetary policy less effective at stimulating investment during periods of elevated volatility (when all firms experience an increase in the variance of their productivity shocks) than during normal times? In this paper, I argue that elevated volatility leads to a decrease in extensive margin...

We study how financial heterogeneity determines firm-level investment responses to monetary policy shocks. In Compustat, a significant amount of firms hold almost zero debt, and among the firms who hold debt, both the amount and the maturity of debt vary greatly. We refer to these financial...