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Firm Investment and Monetary Policy Transmission in the Euro Area

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  • 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)

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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Bibliographic Info

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

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  1. von Kalckreuth, Ulf, 2002. "Monetary Transmission in Germany: New Perspectives on Financial Constraints and Investment Spending," Royal Economic Society Annual Conference 2002 179, Royal Economic Society.
  2. Hall, Bronwyn H. & Mairesse, Jacques & Mulkay, Benoit, 1998. "Firm Level Investment in France and the United States: An Exploration of What We Have Learned in Twenty Years," Department of Economics, Working Paper Series qt5tp4r5nm, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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  25. repec:cup:cbooks:9780521783248 is not listed on IDEAS
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