Monetary transmission: empirical evidence from Luxembourg firm-level data

Patrick Lünnemann () and Thomas Mathä

No 5, BCL working papers from Central Bank of Luxembourg

Abstract: This paper investigates the transmission of monetary policy in Luxembourg. It is the first empirical analysis conducted for Luxembourg firm-level data. The results indicate that the sales accelerator may be at work. A very robust result is the negative effect of the user cost of capital on firms' investment ratio. Changes in user cost are significantly affected by changes in the monetary policy indicator. In addition, firm specific balance sheet characteristics, such as the lagged cash stock to capital ratio influence the investment behaviour according to the broad credit channel theory. It is shown that young firms, in particular, are more sensitive to user cost changes, sales growth and the lagged cash to capital ratio.

Keywords: Investment; User Cost of Capital; Credit Channel; Panel Data (search for similar items in EconPapers)
JEL-codes: D21 D92 E22 E52 (search for similar items in EconPapers)
Pages: 28
Date: 2002-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published as Monetary Transmission: Empirical Evidence from Luxembourg Firm-level Data, in I. Angeloni, A. Kashyap and B. Mojon, (eds),.): Monetary Policy Transmission in the Euro Area, Cambridge Univ. Press., 2003, Chapter 12, pp. 212 - -220.

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Working Paper: Monetary transmission: empirical evidence from Luxembourg firm level data (2001)
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