To what extent can monetary policy impact business innovation? Most macro models tend to assume that monetary policy does not affect innovation, however some recent papers have questioned this assumption. We use extensive and detailed microdata to provide evidence of non-neutrality of money with this regard. Our paper is the first to examine how monetary policy shocks have a varied effect on large firms versus SMEs and on firms that are more exposed to international markets. In the paper we also highlight aggregate demand and credit constraints as two key channels through which the monetary policy shocks might be at play.

Omer Majeed is a Research Manager at the Reserve Bank of Australia, where he works on microdata. Omer has published papers on innovation, economic growth and trade in reputable journals and has lectured economic growth at the ANU. Omer completed his Ph.D. at the Crawford School of Public Policy at the ANU. During his career, Omer has worked at Commonwealth Treasury, Department of Industry, Science and Resources and Department of Foreign Affairs and Trade.