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Is there a Credit Channel in Austria? The Impact of Monetary Policy on Firms' Investment Decisions

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Abstract

Though most economists agree that monetary policy has significant effects on the real sector in the short run, interest-rate elasticities of macroeconomic aggregates in general are found to be low. Recently, the credit channel has been discussed as an additional channel through which monetary impulses can exert influence on the real economy. Though the credit channel is difficult to uncover with aggregate data, its distributional implications can be tested with micro data. We investigate balance sheet and income statement data for Austrian firms. Descriptive statistics do not re-ject the notion that monetary policy could have an effect through the so-called bal-ance sheet channel. Panel estimation results show that firms, which are expected to be affected more by asymmetric information and moral hazard problems, are more responsive to internal funds in their investment decisions. Moreover, financial con-straints become more severe in times of restrictive monetary policy.

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Bibliographic Info

Paper provided by Oesterreichische Nationalbank (Austrian Central Bank) in its series Working Papers with number 41.

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Length: 37
Date of creation: 20 Mar 2000
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Handle: RePEc:onb:oenbwp:41

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Keywords: Credit channel; balance sheet channel; investment; panel data;

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Cited by:
  1. Mojon, Benoît & Kashyap, Anil K. & Angeloni, Ignazio & Terlizzese, Daniele, 2002. "Monetary Transmission in the Euro Area : Where Do We Stand?," Working Paper Series 0114, European Central Bank.
  2. Leo De Haan & Elmer Sterken, 2006. "The impact of monetary policy on the financing behaviour of firms in the Euro area and the UK," The European Journal of Finance, Taylor & Francis Journals, vol. 12(5), pages 401-420.
  3. Valderrama, Maria Teresa, 2001. "Credit channel and investment behaviour in Austria: a micro-econometric approach," Working Paper Series 0108, European Central Bank.
  4. 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.
  5. Shabbir, Safia, 2012. "Monetary Transmission in Pakistan: The Balance Sheet Channel," MPRA Paper 37862, University Library of Munich, Germany.
  6. Santiago Villegas Salazar, 2009. "Evidencia del canal de la hoja de balance a través de la inversión de las empresas colombianas (1995-2007)," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE.
  7. Mojon, Benoît & Smets, Frank & Vermeulen, Philip, 2001. "Investment and monetary policy in the euro area," Working Paper Series 0078, European Central Bank.
  8. Sylvia Kaufmann & Maria Teresa Valderrama, 2004. "Modeling Credit Aggregates," Working Papers 90, Oesterreichische Nationalbank (Austrian Central Bank).

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