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Monetary Policy and Corporate Investment in France

  • Jean-Bernard Chatelain

    ()

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Andre Tiomo

    (CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique)

Using a large panel of 6946 French manufacturing firms, this paper investigates the effect of sales, of the cost of capital and of liquidity constraint variables (cash flow or cash stock) on the stock of capital from 1990 to 1999. The user cost elasticity is at the most 0.26 in absolute terms for all the firms of the sample. Three groups of firms representing around 20 per cent of the sample (firms facing a high risk of bankruptcy, firms belonging to the capital goods sector, firms making extensive use of trade credit) are more sensitive to cash flow. Risky firms are less sensitive to sales, when cash stock replaces cash flow. Simulations following shocks of interest rate (related to monetary policy shocks), provides short run contemporaneous elasticities of investment with respect to interest rate through the user cost and through debt repayments taken into account in cash flow.

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File URL: https://halshs.archives-ouvertes.fr/halshs-00112523v2/document
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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00112523.

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Date of creation: 2003
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Publication status: Published in Angeloni Kashyap Mojon. Monetary Policy Transmission in the Euro Area, Cambridge University Press, pp.187-197, 2003
Handle: RePEc:hal:cesptp:halshs-00112523
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00112523v2
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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  1. Chatelain, Jean-Bernard & Generale, Andrea & Hernando, Ignacio & Von Kalckreuth, Ulf & Vermeulen, Philip, 2001. "Firm investment and monetary transmission in the euro area," Working Paper Series 0112, European Central Bank.
  2. Jean-Bernard Chatelain & Jean-Christophe Teurlai, 2006. "Euler Investment Equation, Leverage and Cash Flow Misspecification: an Empirical Analysis on a Panel of French Manufacturing Firms," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00430853, HAL.
  3. Mojon, Benoît & Smets, Frank & Vermeulen, Philip, 2001. "Investment and monetary policy in the euro area," Working Paper Series 0078, European Central Bank.
  4. Chatelain, Jean-Bernard, 2007. "Improving consistent moment selection procedures for generalized method of moments estimation," Economics Letters, Elsevier, vol. 95(3), pages 380-385, June.
  5. repec:hal:journl:halshs-00112540 is not listed on IDEAS
  6. Jean-Bernard Chatelain, 2003. "Structural Modelling of Financial Constraints on Investment: Where Do We Stand?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00112522, HAL.
  7. Donald W.K. Andrews, 1997. "Consistent Moment Selection Procedures for Generalized Method of Moments Estimation," Cowles Foundation Discussion Papers 1146R, Cowles Foundation for Research in Economics, Yale University.
  8. Jacques Mairesse & Bronwyn H. Hall & Benoît Mulkay, 1999. "Firm-Level Investment in France and the United States: An Exploration of What We Have Learned in Twenty Years," Annals of Economics and Statistics, GENES, issue 55-56, pages 27-67.
  9. Chirinko, Robert S. & Fazzari, Steven M. & Meyer, Andrew P., 1999. "How responsive is business capital formation to its user cost?: An exploration with micro data," Journal of Public Economics, Elsevier, vol. 74(1), pages 53-80, October.
  10. Benoit Mulkay & Bronwyn H. Hall & Jacques Mairesse, 2001. "Firm Level Investment and R&D in France and the United States: A Comparison," Economics Papers 2001-W2, Economics Group, Nuffield College, University of Oxford.
  11. Elston, Julie, 1997. "A Comparison of Empirical Investment Equations using Company Panel Data for France, Germany, Belgium and the UK," Working Papers 981, California Institute of Technology, Division of the Humanities and Social Sciences.
  12. Jean-Bernard Chatelain & Andre Tiomo, 2002. "Investment and the Cost of Capital in the Nineties in France: A Panel Data Investigation," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00112540, HAL.
  13. Stephen D. Oliner & Glenn D. Rudebusch, 1996. "Is there a broad credit channel for monetary policy?," Economic Review, Federal Reserve Bank of San Francisco, pages 3-13.
  14. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
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