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Investment and monetary policy in the euro area

Author

Listed:
  • Mojon, Benoît
  • Smets, Frank
  • Vermeulen, Philip

Abstract

This paper analyses the effects of a change in monetary policy on firms' investment in Germany, France, Italy and Spain using a data set which provides aggregated balance sheet and profit and loss account data for 17 different industries and 3 different size classes. The main findings are twofold. First, in each of the four countries a change in the user cost of capital, which in turn is affected by interest rates, has both statistically and economically significant effects on investment. Second, while the average interest rate on debt is generally higher for small firms than for large firms, there is little evidence that the effects of monetary policy on small firms are larger JEL Classification: E52

Suggested Citation

  • Mojon, Benoît & Smets, Frank & Vermeulen, Philip, 2001. "Investment and monetary policy in the euro area," Working Paper Series 78, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:200178
    Note: 1792986
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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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