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Monetary Policy and Investment in Germany

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  • Nikolaus A. Siegfried

    (Universitaet Hamburg)

Abstract

This paper investigates monetary policy transmission on a microeconomic level. The credit rationing literature suggests that monetary policy has a larger effects on firms which are credit contrained. I use a large panel of German industrial firms to investigate whether this is empirically true in the German case. Whereas monetary policy has a strong effect on all firms, I find no evidence that tight monetary policy affects constrained firms more than others. This contrasts earlier findings for other countries. My result is robust to a wide array of measures of financial tightness. I conclude that the interest rate channel of monetary policy transmission is very important, whereas the credit channel is negligible in Germany. Given the findings for other countries this result indicates that with regard to a common monetary policy in the Euro area monetary policy may influence investment asymmetrically across member countries.

Suggested Citation

  • Nikolaus A. Siegfried, 2000. "Monetary Policy and Investment in Germany," Econometric Society World Congress 2000 Contributed Papers 0955, Econometric Society.
  • Handle: RePEc:ecm:wc2000:0955
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    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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