Firm size and monetary policy transmission: evidence from German business survey data
AbstractUsing business survey data on German manufacturing firms, this paper provides tests for hypotheses formulated in capital market imperfection theories that predict distributional effects in the transmission mechanism of monetary policy. Effects of monetary policy shocks on the business conditions of firms of several size classes are analysed, with the finding of considerable asymmetry. As predicted by theory, small firms are affected more strongly than large firms. To test whether these effects are reinforced when the economy is in a business cycle downturn, the paper employs a new estimation strategy: impulse response analysis conditional on Markov-switching regimes. The findings are supportive of the theoretical hypotheses: in a business cycle downturn, the distributional effects of monetary policy transmission are indeed reinforced. JEL Classification: E52, E44, C32
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Date of creation: May 2000
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Other versions of this item:
- Ehrmann, M., 2000. "Firm Size and Monetary Policy Transmission - Evidence from German Business Survey Data," Economics Working Papers eco2000/12, European University Institute.
- Michael Ehrmann, 2004. "Firm Size and Monetary Policy Transmission – Evidence from German Business Survey Data," CESifo Working Paper Series 1201, CESifo Group Munich.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
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