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Monetary Policy and Investment in Germany


  • Nikolaus A. Siegfried



This paper investigates monetary policy transmission at the microeconometric level. The credit rationing literature suggests that monetary policy has a larger effects on firms which are credit constrained. I use a large panel of German industrial firms to investigate whether this is empirically true in the German case. Whereas interest rates have only a weak effect on investment, I find strong evidence that monetary policy affects constrained firms more than others. Furthermore, investment is more sensitive to financial structure in periods of tight monetary policy. This contrasts earlier findings by Stöß (1996). The same result applies for periods of monetary tightness. I conclude that the credit channel is dominant in Germany. Given the findings for other countries this result indicates that financial systems in the Euro area are less different than suggested in previous studies.

Suggested Citation

  • Nikolaus A. Siegfried, 2000. "Monetary Policy and Investment in Germany," Quantitative Macroeconomics Working Papers 20009, Hamburg University, Department of Economics.
  • Handle: RePEc:ham:qmwops:20009

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    Monetary Policy; Monetary Transmission Mechanism; Corporate Investment; Panel Data; Euler Equations;

    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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