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Does Monetary Policy Have Asymmetric Effects? A Look at the Investment Decisions of Italian Firms

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  • Eugenio Gaiotti

    (Bank of Italy)

  • Andrea Generale

    (Bank of Italy)

Abstract

The paper assesses the quantitative importance of a channel of monetary transmission operating through firms’ balance sheets. It studies the effects of monetary policy on the investment behaviour of various categories of Italian firms, using a panel from the Company Accounts Data Service (Centrale dei Bilanci) and a detailed reconstruction of the user cost of capital at firm level. We estimate that a considerable portion possibly up to one third) of the overall effects of monetary policy is transmitted through the balance-sheet channel. Small firms, firms which have a larger share of assets that cannot be used as collateral, firms with less cash flow or less liquidity are more affected by monetary policy. In quantitative terms, the difference in the response of investment by different types of firms turns out not to be negligible.

Suggested Citation

  • Eugenio Gaiotti & Andrea Generale, 2002. "Does Monetary Policy Have Asymmetric Effects? A Look at the Investment Decisions of Italian Firms," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 61(1), pages 29-59, June.
    • Handle: RePEc:gde:journl:gde_v61_n1_p29-59
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    More about this item

    Keywords

    investment; monetary transmission; user cost of capital;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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