Based on moral hazard, this paper introduces corporate cash holding into the dynamic stochastic general equilibrium (DSGE) model to explain the insufficient investment and monetary policy ineffectiveness, and further discuss the optimal countercyclical policy. Different from external financing...

We investigate the secular increase in the corporate cash holding over the period 1980-2006. We show that along with firm characteristic–related variables, monetary policy and banking structure have a significant bearing on corporate cash holdings, as they determine the opportunity cost of...

Firm cash holdings increased substantially from 1980 to 2017. We study the implications of the increase in firm cash holdings on monetary policy. We introduce a model that takes the distribution of firm cash holdings as an input. We find that the interest rate channel of the transmission of...

We examine whether business groups’ influence on cash holdings depends on ownership. Group affiliation can increase firms’ agency costs or benefit firms by providing an internal capital market, especially in transition economies characterized by weak investor protection and difficult...