Cost channel in the mechanism of transmitting monetary policy in Poland

Abstract

The aim of the present paper is the analysis of the functioning of the cost channel (working capital) in the mechanism of transmitting a monetary policy into the Polish economy as well as the attempt to assess its strengths. To accomplish the above-stated goal, one attempted to solve the following two research problems: is the cost channel operative in Poland patent and what is its strength and efficiency? What was also analysed is the correlation between the level of the benchmark rate of the National Bank of Poland [hereinafter also referred to as NBP] and the value of the working capital relative to current assets and to sales revenues made by the business enterprises in Poland in the period 2005-2017. By analogy, what was also subject to correlation analysis was the relation between the base interest rate of the National Bank and the value of investment expenditures in Poland. At the next stage, via an inductive method, one conducted a synthesis of the conclusions obtained by way of a comparative analysis of the results of one’s own research against the backdrop of the ones obtained by way of the analysis of the influence of a monetary policy exerted on the supply side of an economy, with the latter results having been obtained in consequence of global econometric research. The correlation analysis thus conducted seems to corroborate the influence of the monetary policy pursued by the National Bank of Poland on real economic indices in Poland; and, strictly speaking, on financial policies of companies. Any change in the interest rates of banks seems to significantly influence the cost of the companies’ maintaining working capital. The research results presented herein are exceptionally important from the point of view of the efficacy of a monetary policy. In the process of designing it, the central bank should take into consideration any additional supply effects. In connection with the strongly positive correlation, as demonstrated in the present paper, between the value of the working capital and investment expenditures and the level of interest rates, it is necessary to have a better grasp of the mechanism of cost channel in a given economy as well as to do the ongoing monitoring thereof.