Firm entry-exit is important for economic growth and economic fluctuations.Existing research indicates that an im-portant reason for the slow long-term recovery of output and employment in the United States after the 2008 international fi-nancial crisis is the excessive exit of firms during the crisis and the slowdown of firm entry in the post-crisis period.Firm entry-exit amplifies and propagates aggregate shocks and exacerbates economic fluctuations.In the current economic envi-ronment,how can monetary policy better assist firms to enter the market and mitigate economic fluctuations triggered by firm entry-exit?Obviously,we can answer the above questions only if we understand the mechanism by which monetary policy af-fects firm entry-exit.The Central Financial Work Conference in 2023 points out that it is necessary to accurately grasp the laws and new characteristics of the supply and demand of money and credit,and enrich the monetary policy toolbox.In such context,understanding the monetary policy transmission mechanism from the micro perspective of firm entry-exit can not only deepen the recognition of monetary policy theory,but also contribute to the innovation of monetary policy tools and the improvement of the money supply control mechanism.Therefore,this study investigates the impact of monetary policy shocks on firm entry-exit based on the dynamic entry cost perspective.The findings are as follows.First,loose monetary policy shocks dampen firm entry-exit.Second,the mecha-nism analysis shows that loose monetary policy discourages firm entry by raising wages and capital goods prices,which in turn increases the entry costs of firms.However,it also raises the market value of incumbent firms and eases firm exit.Third,since the entry costs of firms in different industries,sizes,factor intensities,and regions consist of different proportions of wages and capital goods prices,the different response dynamics of wages and capital goods prices under monetary policy shocks generate different entry costs,which,in turn,have a heterogeneous impact on firm entry-exit.According to the above results,this study suggests that the government should maintain prudent aggregate monetary policies in the current economic environment,avoiding monetary policy stimulus that leads to a significant increase in factor prices,which increases the entry costs and thus hinders firm entry;and that it should employ precise structural monetary poli-cies to support firm entry and accumulate strength for the long-term development of the economy.
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