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Firm Investment and Monetary Policy Transmission in the Euro Area

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Author Info
Chatelain, Jean Bernard () (Banque de France)
Generale, Andrea () (Banca d'Italia)
Hernando, Ignacio () (Banco de España)
Kalckreuth, Ulf von () (Deutsche Bundesbank)
Vermeulen, Philip () (European Central Bank)

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Abstract

We present a comparable set of results on the monetary transmission channels on firm investment for the four largest euro-area countries (Germany, France, Italy and Spain). With particularly rich micro datasets for each country containing over 215,000 observations from 1985 to 1999, we explore what can be learned about the interest channel and the broad credit channel. For each of those countries, we estimate neo-classical investment relationships, explaining investment by its user cost, sales and cash flow. We find investment to be sensitive to user cost changes in all those four countries. This implies an operative interest channel in these euro-area countries. We also find investment in all countries to be quite sensitive to cash flow movements. However, only in Italy do smaller firms react more to cash flow movements than large firms, implying that a broad credit channel might not be equally pervasive in all countries.

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Paper provided by International Conferences on Panel Data in its series 10th International Conference on Panel Data, Berlin, July 5-6, 2002 with number A3-3.

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Date of creation: Jan 2002
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Handle: RePEc:cpd:pd2002:a3-3

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Related research
Keywords: investment; monetary transmission; user cost of capital;

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Find related papers by JEL classification:
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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References listed on IDEAS
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Michael Ehrmann, 2004. "Firm Size and Monetary Policy Transmission – Evidence from German Business Survey Data," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  2. I. Arnold & P.J.A. van Els & J. de Haan, 2002. "Wealth Effects and Monetary Policy," WO Research Memoranda (discontinued) 719, Netherlands Central Bank, Research Department. [Downloadable!]
  3. Andrew Benito, 2002. "Financial pressure, monetary policy effects and inventory adjustment by UK and Spanish firms," Banco de España Working Papers 0226, Banco de España. [Downloadable!]
  4. Putkuri , Hanna, 2003. "Cross-country asymmetries in euro area monetary transmission: the role of national financial systems," Research Discussion Papers 15/2003, Bank of Finland. [Downloadable!]
  5. Hanna Putkuri, 2004. "Cross-country asymmetries in euro area monetary transmission: the role of national financial systems," Macroeconomics 0404037, EconWPA. [Downloadable!]
  6. Bojan Markovic, . "Bank capital channels in the monetary transmission mechanism," Bank of England working papers 313, Bank of England. [Downloadable!]
  7. Towa Tachibana & Sekine & Toshitaka, 2004. "Land Investment by Japanese Firms during and after the Bubble Period," Econometric Society 2004 Far Eastern Meetings 631, Econometric Society. [Downloadable!]
  8. Annalisa Ferrando & Rozália Pál, 2006. "Financing constraints and firms’ cash policy in the euro area," Working Paper Series 642, European Central Bank. [Downloadable!]
  9. Jean-Bernard Chatelain, 2002. "Structural modelling of investment and financial constraints: Where do we stand?," Research series 200205-9, National Bank of Belgium. [Downloadable!]
  10. Claudia M. Buch & Alexander Lipponer, 2005. "Business Cycles and FDI: Evidence from German Sectoral Data," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 141(4), pages 732-759, December. [Downloadable!] (restricted)
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  11. Jean-Bernard Chatelain, 2001. "Investment, the cost of capital, and monetary policy in the nineties in France: a panel data investigation," Working Paper Series 106, European Central Bank. [Downloadable!]
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  12. Alessandro Calza & João Sousa, 2005. "Output and inflation responses to credit shocks - are there threshold effects in the euro area?," Working Paper Series 481, European Central Bank. [Downloadable!]
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  18. Paolo Angelini, 2002. "Liquidity and Announcement Effects in the Euro Area," Temi di discussione (Economic working papers) 451, Bank of Italy, Economic Research Department. [Downloadable!]
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  19. Silvia Magri, 2002. "Italian households' debt: determinants of demand and supply," Temi di discussione (Economic working papers) 454, Bank of Italy, Economic Research Department. [Downloadable!]
  20. Frederic Boissay, 2006. "Credit chains and the propagation of financial distress," Working Paper Series 573, European Central Bank. [Downloadable!]
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This page was last updated on 2009-11-27.

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