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Monetary transmission: empirical evidence from Luxembourg firm-level data

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  • Patrick Lünnemann

    ()

  • Thomas Mathä

    ()

Abstract

This paper investigates the transmission of monetary policy in Luxembourg. It is the first empirical analysis conducted for Luxembourg firm-level data. The results indicate that the sales accelerator may be at work. A very robust result is the negative effect of the user cost of capital on firms' investment ratio. Changes in user cost are significantly affected by changes in the monetary policy indicator. In addition, firm specific balance sheet characteristics, such as the lagged cash stock to capital ratio influence the investment behaviour according to the broad credit channel theory. It is shown that young firms, in particular, are more sensitive to user cost changes, sales growth and the lagged cash to capital ratio.

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File URL: http://www.bcl.lu/fr/publications/cahiers_etudes/5/BCLWP005.pdf
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Bibliographic Info

Paper provided by Central Bank of Luxembourg in its series BCL working papers with number 5.

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Length: 28
Date of creation: Oct 2002
Date of revision:
Publication status: published as Monetary Transmission: Empirical Evidence from Luxembourg Firm-level Data, in I. Angeloni, A. Kashyap and B. Mojon, (eds),.): Monetary Policy Transmission in the Euro Area, Cambridge Univ. Press., 2003, Chapter 12, pp. 212 - -220.
Handle: RePEc:bcl:bclwop:bclwp005

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Web page: http://www.bcl.lu/

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Keywords: Investment; User Cost of Capital; Credit Channel; Panel Data;

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References

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  1. Gertler, M. & Gilchrist, S., 1992. "Monetary Policy, Business Cycles and the Behavior of Small Manufacturing Firms," Working Papers, C.V. Starr Center for Applied Economics, New York University 92-08, C.V. Starr Center for Applied Economics, New York University.
  2. Stephen Bond & Julie Ann Elston & Jacques Mairesse & Benoît Mulkay, 1999. "Financial Factors and Investment in Belgium, France, Germany and the UK : A Comparison using Company Panel Data," Working Papers, Centre de Recherche en Economie et Statistique 99-64, Centre de Recherche en Economie et Statistique.
  3. Mojon, Benoît & Smets, Frank & Vermeulen, Philip, 2001. "Investment and monetary policy in the euro area," Working Paper Series, European Central Bank 0078, European Central Bank.
  4. Vermeulen, Philip, 2002. " Business Fixed Investment: Evidence of a Financial Accelerator in Europe," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(3), pages 217-35, July.
  5. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," NBER Working Papers 5146, National Bureau of Economic Research, Inc.
  6. Sevestre, P. & Trognon, A., 1985. "A note on autoregressive error components models," Journal of Econometrics, Elsevier, Elsevier, vol. 28(2), pages 231-245, May.
  7. Sevestre, Patrick & Martinez-Pages, Jorge & Gambacorta, Leonardo & Ehrmann, Michael & Worms, Andreas, 2001. "Financial systems and the role of banks in monetary policy transmission in the euro area," Discussion Paper Series 1: Economic Studies 2001,18, Deutsche Bundesbank, Research Centre.
  8. Leo De Haan & Elmer Sterken, 2006. "The impact of monetary policy on the financing behaviour of firms in the Euro area and the UK," The European Journal of Finance, Taylor & Francis Journals, Taylor & Francis Journals, vol. 12(5), pages 401-420.
  9. Dedola, Luca & Lippi, Francesco, 2005. "The monetary transmission mechanism: Evidence from the industries of five OECD countries," European Economic Review, Elsevier, Elsevier, vol. 49(6), pages 1543-1569, August.
  10. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1994. "The Financial Accelerator and the Flight to Quality," NBER Working Papers 4789, National Bureau of Economic Research, Inc.
  11. Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 2000. "Investment-Cash Flow Sensitivities Are Useful: A Comment On Kaplan And Zingales," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 115(2), pages 695-705, May.
  12. Steven N. Kaplan & Luigi Zingales, 2000. "Investment-Cash Flow Sensitivities Are Not Valid Measures Of Financing Constraints," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 115(2), pages 707-712, May.
  13. Frederic S. Mishkin, 1995. "Symposium on the Monetary Transmission Mechanism," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 9(4), pages 3-10, Fall.
  14. Kaplan, Steven N & Zingales, Luigi, 1997. "Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(1), pages 169-215, February.
  15. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1987. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Jean-Bernard Chatelain & Michael Ehrmann & Andrea Generale & Jorge Martínez-Pagés & Philip Vermeulen & Andreas Worms, 2003. "Monetary Policy Transmission in the Euro Area: New Evidence From Micro Data on Firms and Banks," Journal of the European Economic Association, MIT Press, MIT Press, vol. 1(2-3), pages 731-742, 04/05.
  2. Romuald Morhs, 2010. "Monetary Policy Transmission and Macroeconomic Dynamics in Luxembourg: Results from a VAR Analysis," BCL working papers, Central Bank of Luxembourg 49, Central Bank of Luxembourg.
  3. repec:hal:journl:halshs-00119490 is not listed on IDEAS
  4. Jean-Bernard Chatelain & Andrea Generale & Ignacio Hernando & Ulf von Kalckreuth & Philip Vermeulen, 2001. "Firm Investment and Monetary Policy Transmission in the Euro Area," Banco de Espa�a Working Papers 0119, Banco de Espa�a.
  5. Jean-Bernard Chatelain & Andrea Generale & Ignacio Hernando & Philip Vermeulen & Ulf Von Kalckreuth, 2003. "New Findings on Firm Investment and Monetary Policy Transmission in the Euro Area," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00119490, HAL.
  6. repec:hal:journl:halshs-00112525 is not listed on IDEAS
  7. Mojon, Benoît & Kashyap, Anil K. & Angeloni, Ignazio & Terlizzese, Daniele, 2002. "Monetary Transmission in the Euro Area : Where Do We Stand?," Working Paper Series, European Central Bank 0114, European Central Bank.
  8. Chatelain, Jean-Bernard & Generale, Andrea & Hernando, Ignacio & Von Kalckreuth, Ulf & Vermeulen, Philip, 2001. "Firm investment and monetary transmission in the euro area," Working Paper Series, European Central Bank 0112, European Central Bank.
  9. Santiago Villegas Salazar, 2009. "Evidencia del canal de la hoja de balance a través de la inversión de las empresas colombianas (1995-2007)," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, BANCO DE LA REPÚBLICA - ESPE.
  10. Ignacio Hernando & André Tiomo, 2002. "Financial constraints and investment in France and Spain: a comparison using firm level data," Banco de Espa�a Working Papers 0214, Banco de Espa�a.

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