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Effects of Monetary Policy on Venture Capital

Wilensjö, Victor LU and Winberg, Johan LU (2024) NEKH02 20241
Department of Economics
Abstract
This thesis investigates the effects of monetary policy on investments by venture capital firms. Modeling central banks’ interest rates and various macroeconomic variables on venture capital investments, we find a statistically significant relationship whereby expansive monetary policy is correlated with more investment in startups by venture capital. The panel data models use data from 2000 to 2022 over 25 countries. This paper discusses how this relationship is reasonable using price-setting theories, including but not limited to the Venture Capital Method and Discounted Cash Flow method. This paper also attempts to compare seed and early-stage investments against expansion and later-stage investments, and the differences in effect of... (More)
This thesis investigates the effects of monetary policy on investments by venture capital firms. Modeling central banks’ interest rates and various macroeconomic variables on venture capital investments, we find a statistically significant relationship whereby expansive monetary policy is correlated with more investment in startups by venture capital. The panel data models use data from 2000 to 2022 over 25 countries. This paper discusses how this relationship is reasonable using price-setting theories, including but not limited to the Venture Capital Method and Discounted Cash Flow method. This paper also attempts to compare seed and early-stage investments against expansion and later-stage investments, and the differences in effect of interest rates. No distinction in effect was found. This research highlights the importance of applying effective monetary policy to enable innovation through venture capital-backed startups. (Less)
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author
Wilensjö, Victor LU and Winberg, Johan LU
supervisor
organization
course
NEKH02 20241
year
type
M2 - Bachelor Degree
subject
keywords
Venture capital, Monetary policy, Interest rates, Investments, DCF, CAPM, VCM
language
English
id
9158318
date added to LUP
2024-09-24 09:00:30
date last changed
2024-09-24 09:00:30
@misc{9158318,
  abstract     = {{This thesis investigates the effects of monetary policy on investments by venture capital firms. Modeling central banks’ interest rates and various macroeconomic variables on venture capital investments, we find a statistically significant relationship whereby expansive monetary policy is correlated with more investment in startups by venture capital. The panel data models use data from 2000 to 2022 over 25 countries. This paper discusses how this relationship is reasonable using price-setting theories, including but not limited to the Venture Capital Method and Discounted Cash Flow method. This paper also attempts to compare seed and early-stage investments against expansion and later-stage investments, and the differences in effect of interest rates. No distinction in effect was found. This research highlights the importance of applying effective monetary policy to enable innovation through venture capital-backed startups.}},
  author       = {{Wilensjö, Victor and Winberg, Johan}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Effects of Monetary Policy on Venture Capital}},
  year         = {{2024}},
}