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A Vectorautoregressive Investment Model (VIM) and Monetary Policy Transmission: Panel Evidence from German Firms

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  • von Kalckreuth, Ulf
  • Chirinko, Robert S.
  • Breitung, Jörg

Abstract

This paper proposes a new framework for studying the effects of monetary policy on business investment. Important ambiguities with the modeling of investment dynamics and interactions between real and financial decisions suggest modeling investment spending as a VAR. Based on a panel of financial statement data for 6,408 German firms (44,345 datapoints) supplemented with user costs of capital and confidential measures of creditworthiness, we generate GMM estimates of a Vectorautoregressive Investment Model (VIM). It contains investment and cash flow as endogenous variables, and the user costs of capital and sales growth as additional explanatory variables. We report four substantive findings. First, monetary policy matters, and business investment is responsive to interest rates embedded in the user cost of capital. Second, allowing real and financial decisions to interact raises the impact of monetary policy by one-third relative to simulations of an investment equation in isolation that assumes an exogenous financial policy. Third, the sensitivity of investment to cash flow shocks is raised by twothirds relative to single equation computations. Fourth, firms with poor credit ratings are "paralysed" in being unable to react to changing economic conditions as given by relative prices or demand. On the other hand and consistent with binding financing constraints, these endangered firms show a high responsiveness to cash flow shocks. Apart from these substantive conclusions, this paper demonstrate that the panel VAR approach is useful for modeling firm dynamics and real/financial interactions and for assessing monetary policy transmission. -- In diesem Papier wird ein neuer Rahmen für die Untersuchung der Wirkungen von Geldpolitik auf privatwirtschaftliche Investitionen vorgeschlagen. Wegen ungelöster Probleme bei der Modellierung der Investitionsdynamik und der Interaktion zwischen realwirtschaftlicher und der finanzieller Sphäre einer Unternehmung bietet sich die Modellierung der Investitionsentscheidung als VAR an. Auf der Grundlage eines Panels von Jahresabschlüssen für 6,409 deutsche Firmen (44 345 Datenpunkte), erweitert um Kapitalnutzungskosten und vertrauliche Daten über Kreditwürdigkeit, stellen wir GMM-Schätzungen eines vektorautoregressiven Investitionsmodells (VIM) vor. Es enthält die Investition und den Cash Flow als endogene Variablen, und außerdem Kapitalnutzungskosten und Umsatzwachstum als weitere erklärende Variablen Vier inhaltliche Ergebnisse verdienen es, herausgehoben zu werden. Erstens, Geldpolitik ist wirksam, und privatwirtschaftliche Investitionen reagieren auf Änderungen der in den Kapitalnutzungskosten enthaltenen Zinsen. Zweitens, eine Berücksichtigung der Interaktionen von realwirtschaftlichen und finanziellen Entscheidungen erhöht die geschätzte Wirkung von Geldpolitik um ein Drittel im Vergleich zur Simulation einer isolierten Investitionsgleichung, bei welcher die finanzielle Situation als exogen betrachtet wird. Drittens erhöht sich die Sensitivität der Investition bezüglich Cash Flow-Schocks um rund zwei Drittel, verglichen mit einer Einzelgleichungsschätzung. Viertens, Firmen mit geringer Kreditwürdigkeit wirken "gelähmt" ? sie sind nicht in der Lage, sich auf Änderungen der wirtschaftlichen Bedingungen in Gestalt von Relativpreisen oder der Nachfrage einzustellen. Andererseits weisen diese Firmen eine hohe Sensitivität bezüglich Cash Flow- Schocks auf, was konsistent ist mit bindenden Finanzierungsrestriktionen. Abgesehen von diesen inhaltlichen Ergebnissen zeigt das Papier, dass der Panel VAR-Ansatz für die Modellierung der unternehmerischen Dynamik, der Interaktion von realer und finanzieller Sphäre sowie der monetären Transmission zweckmäßig ist.

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Bibliographic Info

Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2003,06.

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Date of creation: 2003
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Handle: RePEc:zbw:bubdp1:4201

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Keywords: Monetäre Transmission; Panel VAR's; einzelwirtschaftliche Investitionen; Deutschland; Monetary Policy Transmission; Panel Data VAR's; Firm-Level Investment; Germany;

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Cited by:
  1. W.A. Bruinshoofd, 2003. "Corporate Investment and Financing Constraints: Connections with Cash Management," WO Research Memoranda (discontinued) 734, Netherlands Central Bank, Research Department.
  2. Ulf von Kalckreuth & Emma Murphy, 2005. "Financial constraints and capacity adjustment in the United Kingdom: evidence from a large panel of survey data," Bank of England working papers 260, Bank of England.
  3. von Kalckreuth, Ulf, 2000. "Exploring the role of uncertainty for corporate investment decisions in Germany," Discussion Paper Series 1: Economic Studies 2000,05, Deutsche Bundesbank, Research Centre.
  4. Seok-Kyun Hur, 2005. "Money Growth and Interest Rates," NBER Working Papers 11102, National Bureau of Economic Research, Inc.
  5. Issouf Samaké, 2008. "Investment and Growth Dynamics," IMF Working Papers 08/120, International Monetary Fund.
  6. Ulf von Kalckreuth, 2005. "Financial constraints and real activity: a non-structural approach using UK survey data," BIS Papers chapters, in: Bank for International Settlements (ed.), Investigating the relationship between the financial and real economy, volume 22, pages 64-80 Bank for International Settlements.

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