Firm size and the transmission of monetary policy in Brazil

This dissertation examines the influence that differences in size and product durability exert on firms' response to monetary shocks, in terms of their financial performance (measured by market value and return on assets) and their short-term financial position (measured by interest coverage and the cash conversion cycle). Based on the highfrequency identification of unanticipated shocks through 1-day interest rate futures contracts and using quarterly panel data from Brazilian publicly held firms, impulseresponse functions were estimated via Local Projections. The results indicated that smaller firms are more sensitive to monetary policy, in line with the empirical literature on financial frictions, as well as with alternative mechanisms that act through size (market power, economies of scope, and the lending channel), not measured in this study. In turn, firms in the durable-goods chain (regardless of their size), which is more exposed to credit and discretionary consumption, are also more affected by monetary shocks than non-durable-goods firms.