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Towards a monetary policy evaluation framework

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Author Info
Carmen Martinez-Carrascal () (Servicio de Estudios, Banco de España, Alcalá, 50, 28014 Madrid, Spain.)
Annalisa Ferrando () (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.)
Abstract

This paper analyses the impact that firms' financial position has on investment decisions using panel data from a large sample of non-financial corporations (around 120,000 firms)in six euro area countries (Belgium, Germany, France, Italy, the Netherlands and Spain). The results indicate that financial position is important to explain capital expenditures, as financial pressure appears relevant in explaining investment dynamics when it is proxied by cash flow, indebtedness and debt burden. The results also show differences in the sensitivity of investment rates to changes in financial pressure across countries, which appears to be especially large in the Netherlands and Italy and relatively small in Germany. JEL Classification: C33, E22, G32, J23.

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Paper provided by European Central Bank in its series Working Paper Series with number 943.

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Length: 39 pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:ecb:ecbwps:20080943

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Related research
Keywords: Financial pressure; fixed investment; balance sheet channel; panel data.;

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  19. 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. [Downloadable!] (restricted)
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  21. Stephen Bond & Julie Ann Elston & Jacques Mairesse & Benoît Mulkay, 2003. "Financial Factors and Investment in Belgium, France, Germany, and the United Kingdom: A Comparison Using Company Panel Data," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 153-165, 09. [Downloadable!] (restricted)
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