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Microeconometric Evidence for a German Credit Channel

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  • Nikolaus A. Siegfried

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Abstract

This paper investigates monetary policy transmission at the microeconometric level. The credit rationing literature suggests that monetary policy has a larger effects on firms which are credit constrained. I use a large panel of German industrial firms to investigate whether this is empirically true in the German case. Whereas interest rates have only a weak effect on investment, I find strong evidence that monetary policy affects constrained firms more than others. Furthermore, investment is more sensitive to financial structure in periods of tight monetary policy. This contrasts earlier findings by Stöß (1996). The same result applies for periods of monetary tightness. I conclude that the credit channel is dominant in Germany. Given the findings for other countries this result indicates that financial systems in the Euro area are less different than suggested in previous studies.

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Bibliographic Info

Paper provided by Hamburg University, Department of Economics in its series Quantitative Macroeconomics Working Papers with number 20002.

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Date of creation: Jan 2000
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Handle: RePEc:ham:qmwops:20002

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Related research

Keywords: Monetary Policy; Monetary Transmission Mechanism; Corporate Investment; Panel Data; Euler Equations;

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Cited by:
  1. Raabe Katharina & Arnold, Ivo J.M. & Kool, Clemens J.M., 2006. "Industries and the Bank Lending Effects of Bank Credit Demand and Monetary Policy in Germany," Research Memorandum 006, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  2. Ehrmann, Michael, 2000. "Firm size and monetary policy transmission: evidence from German business survey data," Working Paper Series 0021, European Central Bank.
  3. Cobham, Alex, 2001. "EMU, Monetary Policy and the Role of Financial Constraints," EIFC - Technology and Finance Working Papers 6, United Nations University, Institute for New Technologies.
  4. L. de Haan & E. Sterken, 2000. "Capital Structure, Corporate Goverance, and Monetary Policy: Firm-Level Evidence for the Euro Area," WO Research Memoranda (discontinued) 637, Netherlands Central Bank, Research Department.
  5. Kirchesch, Kai, 2004. "Financial Risks, Bankruptcy Probabilities, and the Investment Behaviour of Enterprises," HWWA Discussion Papers 299, Hamburg Institute of International Economics (HWWA).

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