Firm Investment and Monetary Policy Transmission in the Euro Area

Jean-Bernard Chatelain, Andrea Generale (), Ignacio Hernando, Ulf von Kalckreuth and Philip Vermeulen
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Andrea Generale: Banca d'Italia

No A3-3, 10th International Conference on Panel Data, Berlin, July 5-6, 2002 from International Conferences on Panel Data

Abstract: We present a comparable set of results on the monetary transmission channels on firm investment for the four largest euro-area countries (Germany, France, Italy and Spain). With particularly rich micro datasets for each country containing over 215,000 observations from 1985 to 1999, we explore what can be learned about the interest channel and the broad credit channel. For each of those countries, we estimate neo-classical investment relationships, explaining investment by its user cost, sales and cash flow. We find investment to be sensitive to user cost changes in all those four countries. This implies an operative interest channel in these euro-area countries. We also find investment in all countries to be quite sensitive to cash flow movements. However, only in Italy do smaller firms react more to cash flow movements than large firms, implying that a broad credit channel might not be equally pervasive in all countries.

Keywords: investment; monetary transmission; user cost of capital (search for similar items in EconPapers)
JEL-codes: E22 E50 (search for similar items in EconPapers)
Date: 2002-01
New Economics Papers: this item is included in nep-cba, nep-eec, nep-fin and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (41)

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Related works:
Working Paper: Firm investment and monetary policy transmission in the Euro Area (2003)
Working Paper: Firm investment and monetary policy transmission in the Euro Area (2003)
Working Paper: Firm Investment and Monetary Policy Transmission in the Euro Area (2002)
Working Paper: Firm Investment and Monetary Policy Transmission in the Euro Area (2001)
Working Paper: Firm Investment and Monetary Policy Transmission in the Euro Area (2001)
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