Translators: Matheus Henrique Dal Molin Ribeiro, Gilson Adamczuk Oliveira, Bruno Luis Barbosa Cavalcante, José Donizetti de Lima, Manuel Pereira Lopes, Sandra Cristina De Faria Ramos, Ricardo Puziol de Oliveira, and Tatiane Teixeira Leal.
This paper evaluates the impact of monetary shocks identified around the meetings of the Brazilian Monetary Policy Committee (COPOM) on firms’ investment and capital structure, using the local projections method in a panel data framework. The study found that the effect of monetary shocks on firms’ investment is heterogeneous and affects firms with higher liquidity more significantly. Firms with greater liquidity tend to reduce their short-term assets more in response to these shocks. The results demonstrate significantly different behavior between firms with low and high liquidity regarding debt structure. Firms adjust the magnitude and maturity of their debts in response to the shocks.