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Firm investment and monetary policy transmission in the Euro Area

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Author Info

  • Jean-Bernard Chatelain

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

  • Andrea Generale

    (Banca d´Italia - Banca d´Italia)

  • Ignacio Hernando

    (Bank of Spain - Bank of Spain)

  • Ulf Von Kalckreuth

    (Bundesbank - Bundesbank)

  • Philip Vermeulen

    (ECB - European Central Bank - European Central Bank)

Abstract

This paper presents a comparable set of results on the monetary transmission channels on firm investment (the interest rate channel and the broad credit channel) for the four largest euro-areacountries (Germany, France, Italy and Spain), using particularly rich micro datasets for eachcountry containing over 215,000 observations from 1985 to 1999. For each of those countries,investment relationships are estimated explaining investment by its user cost, sales and cash flow.A first result is that investment is sensitive to user cost changes in all those four countries. Thisimplies an operative interest channel in these euro-area countries. A second result is that investmentin all countries is quite sensitive to cash flow movements. However, only in Italy do smaller firmsreact more to cash flow movements than large firms, implying that a broad credit channel might notbe equally pervasive in all countries.

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Bibliographic Info

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00112525.

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Date of creation: 2003
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Publication status: Published, Monetary Policy Transmission in the Euro Area, Cambridge University Press (Ed.), 2003, 100-130
Handle: RePEc:hal:cesptp:halshs-00112525

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00112525
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Keywords: Investment; Monetary Transmission Channels; User Cost of Capital;

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References

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