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Firm investment and monetary policy transmission in the Euro Area

  • Jean-Bernard Chatelain

    ()

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

  • Andrea Generale

    (Banca d´Italia - Banca d´Italia)

  • Ignacio Hernando

    (Bank of Spain - Bank of Spain)

  • Ulf Von Kalckreuth

    (Bundesbank - Bundesbank)

  • Philip Vermeulen

    (ECB - European Central Bank - European Central Bank)

This paper presents a comparable set of results on the monetary transmission channels on firm investment (the interest rate channel and the broad credit channel) for the four largest euro-areacountries (Germany, France, Italy and Spain), using particularly rich micro datasets for eachcountry containing over 215,000 observations from 1985 to 1999. For each of those countries,investment relationships are estimated explaining investment by its user cost, sales and cash flow.A first result is that investment is sensitive to user cost changes in all those four countries. Thisimplies an operative interest channel in these euro-area countries. A second result is that investmentin all countries is quite sensitive to cash flow movements. However, only in Italy do smaller firmsreact more to cash flow movements than large firms, implying that a broad credit channel might notbe equally pervasive in all countries.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00112525.

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Date of creation: 2003
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Publication status: Published in Angeloni I., Kashyap A., Mojon B. Monetary Policy Transmission in the Euro Area, Cambridge University Press, pp.100-130, 2003
Handle: RePEc:hal:cesptp:halshs-00112525
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00112525
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  9. Mojon, Benoit & Smets, Frank & Vermeulen, Philip, 2002. "Investment and monetary policy in the euro area," Journal of Banking & Finance, Elsevier, vol. 26(11), pages 2111-2129, November.
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  17. Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
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  23. von Kalckreuth, Ulf, 2001. "Monetary transmission in Germany: New Perspectives on Financial Constraints and Investment Spending," Discussion Paper Series 1: Economic Studies 2001,19, Deutsche Bundesbank, Research Centre.
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