The Effect of Monetary Policy on Firm Beliefs

Last registered on December 20, 2024

Pre-Trial

Trial Information

General Information

Title
The Effect of Monetary Policy on Firm Beliefs
RCT ID
AEARCTR-0014966
Initial registration date
December 20, 2024

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
December 20, 2024, 2:57 PM EST

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

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Primary Investigator

Affiliation
ETH Zurich

Other Primary Investigator(s)

PI Affiliation
ETH Zurich
PI Affiliation
ETH Zurich
PI Affiliation
ETH Zurich

Additional Trial Information

Status
In development
Start date
2024-10-01
End date
2025-06-24
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
We examine how Swiss firms adjust their investment plans in response to changes in the Swiss National Bank's (SNB) policy rate. Using an online survey experiment with a vignette, we target firms from the KOF Investment Survey to analyze investment revisions across sectors. The study explores nonlinearities and asymmetries in firms’ responses, the role of financing sources, and substitution effects. It identifies key transmission channels—demand, financing costs, and exchange rates—and considers how investment realization certainty influences reactions.
External Link(s)

Registration Citation

Citation
Abberger, Klaus et al. 2024. "The Effect of Monetary Policy on Firm Beliefs." AEA RCT Registry. December 20. https://doi.org/10.1257/rct.14966-1.0
Experimental Details

Interventions

Intervention(s)
We conduct a survey experiment targeting Swiss firms participating in the KOF Investment Survey. The intervention consists of exposing firms to a series of hypothetical scenarios (vignettes) about unexpected changes in the Swiss National Bank's (SNB) policy rate.
Intervention Start Date
2024-10-01
Intervention End Date
2024-12-24

Primary Outcomes

Primary Outcomes (end points)
The primary outcome is the extent to which firms revise their planned investment volumes in response to hypothetical changes in the SNB policy rate. This is measured as the percentage increase or decrease in planned investments relative to their baseline plans. Investments are distinguished into equipment, construction, and research and development.
Primary Outcomes (explanation)
Change in Investment Plans:
The primary outcome is the extent to which firms revise their planned investment volumes in response to hypothetical changes in the SNB policy rate. This is measured as the percentage increase or decrease in planned investments relative to their baseline plans. Investments are distinguished into equipment, construction, and research and development.

Identified Channels of Influence:
Firms' self-reported assessment of the primary channels through which SNB policy rate changes affect their investment decisions. These channels include:
- Demand for their products or services
- Costs of external financing (e.g., loans, bonds)
- Availability of external financing
- Exchange rate effects

Asymmetry in Responses:
Differences in firms’ responses to positive versus negative policy rate shocks.

Nonlinearities in Responses:
Differences in firms' responses depending on the magnitude of the policy rate shocks (+0.50pp, +0.25pp, -0.25pp, -0.50pp).

Heterogeneity by Financing Structure:
Variation in investment revisions based on the firms’ financing sources (e.g., internal funds, bank loans, equity financing).

Change in Financing Structure (substitution effects):
Variation in firms' financing sources in response to the unexpected change in the SNB policy rate.

Further heterogeneity analyses:
Differences in firms' responses across sectors, firm size, export orientation

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
This study employs a survey experiment to analyze how Swiss firms adjust their investment plans in response to hypothetical changes in the Swiss National Bank's (SNB) policy rate. The experiment is conducted as part of the KOF Investment Survey, targeting firms from various sectors across Switzerland.

The experimental design consists of the following steps:

1) Baseline Information Collection, 2) Policy Rate Expectations, 3) Hypothetical Scenarios (Interventions), 4) Channels of Influence, 5) Outcome Assessment.

The randomized nature of the hypothetical scenarios ensures that the causal impact of policy rate changes on investment behavior can be identified, allowing for the examination of nonlinearities, asymmetries, and heterogeneities in firms' responses. Data analysis will focus on quantifying these effects and identifying key determinants of firms' sensitivity to monetary policy changes.
Experimental Design Details
Not available
Randomization Method
Randomization is conducted in the office by a computer (at the firm's login). The hypothetical scenarios (vignettes) are randomly assigned to firms with equal probabilities for all treatment arms using a computer-generated random number algorithm to ensure unbiased and equitable assignment across participants. This randomization process ensures that the treatment groups are statistically comparable and that any observed differences in outcomes can be attributed to the intervention.
Randomization Unit
The unit of randomization is the firm. Each firm participating in the survey experiment is independently and randomly assigned to one of the hypothetical scenarios regarding changes in the SNB policy rate. Specifically, firms are randomized to one of the four increments (changes in policy rates by +0.50, +0.25, -0.25, or -0.50 percentage points from prior expectations) or the control group (policy rate as expected)

This approach ensures that the treatment groups (i.e., firms exposed to different policy rate changes) are statistically comparable, allowing us to identify the causal effects of these increments on investment behavior.
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
The RCT has four treatment groups and one control group. Each group is about the same size.
Sample size: planned number of observations
Approx. 3,500 respondents are invited to participate. They are randomly selected into the treatment arms where they are presented with different hypothetical scenarios. The expected number of respondents is about 1,700 firms.
Sample size (or number of clusters) by treatment arms
The participating firms (approximately 1,700 expected) will be randomized with equal probabilities across the five treatment arms:

Control group: 340 firms
Vignette 1 (policy rate expectations +0.50 percentage points): 340 firms
Vignette 2 (policy rate expectations +0.25 percentage points): 340 firms
Vignette 3 (policy rate expectations -0.25 percentage points): 340 firms
Vignette 4 (policy rate expectations -0.50 percentage points): 340 firms
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials

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IRB

Institutional Review Boards (IRBs)

IRB Name
ETH Zurich Ethics Commission.
IRB Approval Date
2024-09-25
IRB Approval Number
Project 24 ETHICS-284