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Catherine Fuss

1 December 2001
WORKING PAPER SERIES - No. 107
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Abstract
This paper investigates the effects of monetary policy on firms' investment behaviour. The analysis relies on a comprehensive database of Belgian firms covering all sectors of economic activity and firms of all sizes. We proceed in two steps. First, we estimate a reduced-form investment equation derived from the neo-classical model, augmented by cash flow. This equation is estimated by the Arellano and Bond (1991) GMM procedure. Second, we compute the elasticity of the user cost of capital and the cash flow/capital ratio to the policy-controlled interest rate. We estimate the model for various sample splits according to sectors and sizes. Our results indicate that small firms are more sensitive to monetary policy than large firms, and that services are almost unaffected. Since the impact differs across sectors and sizes, we can conclude that monetary policy produces distributional effects
JEL Code
C23 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Panel Data Models, Spatio-temporal Models
D21 : Microeconomics→Production and Organizations→Firm Behavior: Theory
E50 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→General
Network
Eurosystem Monetary Transmission Network
28 April 2004
WORKING PAPER SERIES - No. 347
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Abstract
We estimate the effect of demand and price uncertainty on firms' investment decisions from a panel of manufacturing firms. Uncertainty measures are derived from firms' subjective qualitative expectations. They are close to their theoretical counterparts, the variances of future demand and price shocks. We find that demand uncertainty depresses planned and realized investment, while price uncertainty is insignificant. This is consistent with the behavior of monopolistic firms with irreversible capital (Caballero, 1991). Further, firms revise their investment plans very little. They may do so in response to new information on sales growth, but not as a result of reduced uncertainty.
JEL Code
D21 : Microeconomics→Production and Organizations→Firm Behavior: Theory
D24 : Microeconomics→Production and Organizations→Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity
D81 : Microeconomics→Information, Knowledge, and Uncertainty→Criteria for Decision-Making under Risk and Uncertainty
D92 : Microeconomics→Intertemporal Choice→Intertemporal Firm Choice, Investment, Capacity, and Financing
C23 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Panel Data Models, Spatio-temporal Models
20 July 2006
WORKING PAPER SERIES - No. 658
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Abstract
We test whether firms with a single bank are better shielded from loss of credit and investment cuts in periods of adverse cash flow shocks than firms with multiple bank relationships. Our estimates of the cash flow sensitivity of investment show that both types of firms are equally subject to financing constraints that bind only in the event of adverse cash flow shocks. In these periods, firms incur lower cuts in investment expenditures when they can obtain extra credit. In periods of adverse cash flow shocks, the probability of obtaining extra bank debt becomes more sensitive to the size and leverage of the firm.
JEL Code
D92 : Microeconomics→Intertemporal Choice→Intertemporal Firm Choice, Investment, Capacity, and Financing
17 December 2007
WORKING PAPER SERIES - No. 840
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Abstract
This paper evaluates the extent of downward nominal and real wage rigidity for different categories of workers and firms using the methodology recently developed by the International Wage Flexibility Project (Dickens and Goette, 2006). The analysis is based on an administrative data set on individual earnings, covering one-third of employees of the private sector in Belgium over the period 1990-2002. Our results show that Belgium is characterised by strong real wage rigidity and very low nominal wage rigidity, consistent with the Belgian wage formation system of full indexation. Real rigidity is stronger for white-collar workers than for blue-collar workers. Real rigidity decreases with age and wage level. Wage rigidity appears to be lower in firms experiencing downturns. Finally, smaller firms and firms with lower job quit rates appear to have more rigid wages. Our results are robust to alternative measures of rigidity.
JEL Code
J31 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→Wage Level and Structure, Wage Differentials
Network
Wage dynamics network
25 January 2008
WORKING PAPER SERIES - No. 854
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Abstract
This paper decomposes wage bill changes at the firm level into components due to wage changes, and components due to net flows of employment. The analysis relies on an administrative employer-employee dataset of individual annual earnings matched with firms' annual accounts for Belgium over the period 1997-2001. Results point to asymmetric behaviour depending on economic conditions. On average, wage bill contractions result essentially from employment cuts in spite of wage increases. Wage growth of job stayers is moderated but still positive; and wages of entrants compared with those of incumbents are no lower. The labour force cuts are achieved through both reduced entries and increased exits. Higher exits may be due to more layoffs, especially in smaller firms, and wider use of early retirement, especially in manufacturing. In addition, the paper points up the role of overtime hours, temporary unemployment and interim workers in adapting to short-run fluctuations.
JEL Code
J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General
J60 : Labor and Demographic Economics→Mobility, Unemployment, Vacancies, and Immigrant Workers→General
Network
Wage dynamics network
12 February 2009
WORKING PAPER SERIES - No. 1006
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Abstract
This paper examines whether differences in wage rigidity across sectors can be explained by differences in workforce composition, competition, technology and wage-bargaining institutions. We adopt the measure of downward real wage rigidity (DRWR) developed by Dickens and Goette (2006) and rely on a large administrative matched employer-employee dataset for Belgium over the period 1990-2002. Firstly, our results indicate that DRWR is significantly higher for white-collar workers and lower for older workers and for workers with higher earnings and bonuses. Secondly, beyond labour force composition effects, sectoral differences in DRWR are related to competition, firm size, technology and wage bargaining institutions. We find that wages are more rigid in more competitive sectors, in labour-intensive sectors, and in sectors with predominant centralised wage setting at the sector level as opposed to firm-level wage agreements.
JEL Code
J31 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→Wage Level and Structure, Wage Differentials
Network
Wage dynamics network
4 March 2009
WORKING PAPER SERIES - No. 1021
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Abstract
Using firm-level data for Belgium over the period 1997-2005, we evaluate the elasticity of firms' labour and real average labour compensation to microeconomic total factor productivity (TFP). Our results may be summarised as follows. First, we find that the elasticity of average labour compensation to firm-level TFP is very low contrary to that of labour, consistent with real wage rigidity. Second, while the elasticity of average labour compensation to idiosyncratic firm- level TFP is close to zero, the elasticity with respect to aggregate sector-level TFP is high. We argue that average labour compensation adjustment mainly occur at the sector level through sectoral collective bargaining, which leaves little room for firm-level adjustment to firm-specific shocks. Third, we report evidence of a positive relationship between hours and idiosyncratic TFP, as well as aggregate TFP within the year.
JEL Code
J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General
J60 : Labor and Demographic Economics→Mobility, Unemployment, Vacancies, and Immigrant Workers→General
Network
Wage dynamics network
17 December 2014
WORKING PAPER SERIES - No. 1752
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Abstract
Policy-making institutions such as the European Commission, the ECB and the OECD often use unit labor costs as a measure of international competitiveness. The goal of this paper is to examine how well this measure is related to international export performance at the firm level. To this end, we use Belgian firm-level data for the period 1999-2010 to analyze the impact of unit labor costs on exports. We use exports adjusted for their import content. We find a statistically significant negative effect of unit labor costs on export performance of firms with an estimated elasticity of the intensive margin of exports ranging between -0.2 and -0.4. This result is robust to various specifications, including firm, time and sector fixed effects and estimation approaches. We find that this elasticity varies between sectors and between firms, with firms that are more labor-intensive having a higher elasticity of exports with respect to unit labor costs. The micro data also enable us to analyze the impact of unit labor costs on the extensive margin. Our results show that higher unit labor costs reduce the probability of starting to export for non-exporters and increase the probability of exporters stopping. While our results show that unit labor costs have an impact on the intensive margin and extensive margin of firm-level exports, the effect is rather low, suggesting that passthrough of costs into prices is limited or that demand for exported products is not elastic. The latter is consistent with recent trade models emphasizing that not only relative costs, but also demand factors such as quality and taste matter for explaining firm-level exports.
JEL Code
F1 : International Economics→Trade
F4 : International Economics→Macroeconomic Aspects of International Trade and Finance
F16 : International Economics→Trade→Trade and Labor Market Interactions
Network
Competitiveness Research Network