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Credit Channel and Investment Behavior in Austria: A Micro-Econometric Approach

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Abstract

Using individual firm data, this study analyzes the credit channel in Austria. The estimation is based on an accelerator specification of investment demand augmented by the liquidity ratio and a firm specific user cost of capital. The results show that there is a credit channel in Austria affecting all firms, while the interest rate channel is significant as long as the liquidity ratio is not included in the regression. Taking into account trade credit or lending relationships increases the significance but not necessarily the size of the interest rate channel. The interest rate channel is not significant for young firms due mainly to the fact that young firms rely more heavily on sales to increase investment. In general it is found that firms can reduce the sensitivity of investment to their liquidity position by building lending relationships with a housebank or using trade credit as a substitute for bank loans.

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File URL: http://www.oenb.at/dms/oenb/Publikationen/Volkswirtschaft/Working-Papers/2002/Working-Paper-58/fullversion/wp58_tcm16-6146.pdf
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Paper provided by Oesterreichische Nationalbank (Austrian Central Bank) in its series Working Papers with number 58.

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Date of creation: 28 Jan 2002
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Handle: RePEc:onb:oenbwp:58

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Postal: Oesterreichische Nationalbank, Economic Studies Division, c/o Beate Hofbauer-Berlakovich, POB 61, A-1011 Vienna, Austria
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Keywords: credit channel; investment demand; panel data;

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  1. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1994. "The Financial Accelerator and the Flight to Quality," NBER Working Papers 4789, National Bureau of Economic Research, Inc.
  2. Vermeulen, Philip, 2000. "Business fixed investment: evidence of a financial accelerator in Europe," Working Paper Series 0037, European Central Bank.
  3. Jeremy C. Stein & Anil K. Kashyap, 2000. "What Do a Million Observations on Banks Say about the Transmission of Monetary Policy?," American Economic Review, American Economic Association, vol. 90(3), pages 407-428, June.
  4. Stephen Bond & Julie Elston & Jacques Mairesse & Benoit Mulkay, 1997. "Financial Factors and Investment in Belgium, France, Germany and the UK:A Comparison Using Company Panel Data," NBER Working Papers 5900, National Bureau of Economic Research, Inc.
  5. Katrin Wesche, 2000. "Is there a Credit Channel in Austria? The Impact of Monetary Policy on Firms' Investment Decisions," Working Papers 41, Oesterreichische Nationalbank (Austrian Central Bank).
  6. Steve Bond & Costas Meghir, 1994. "Financial constraints and company investment," Fiscal Studies, Institute for Fiscal Studies, vol. 15(2), pages 1-18, May.
  7. Klaus GUGLER, 1997. "Investment Spending in Austria: Asymmetric Information Versus Managerial Discretion," Vienna Economics Papers vie9705, University of Vienna, Department of Economics.
  8. R. Glenn Hubbard, 1994. "Is There a `Credit Channel' for Monetary Policy?," NBER Working Papers 4977, National Bureau of Economic Research, Inc.
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