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Jean-Bernard Chatelain

1 December 2001
WORKING PAPER SERIES - No. 112
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Abstract
We present a comparable set of results on the monetary transmission channels on firm investment for the four largest countries of the euro area (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 on the interest channel and 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 those countries to be quite sensitive to cash flow movements. However we find that only in Italy smaller firms react more to cash flow movements, implying that a broad credit channel might not be as pervasive in all countries
JEL Code
E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
E50 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→General
Network
Eurosystem Monetary Transmission Network
1 December 2001
WORKING PAPER SERIES - No. 106
Details
Abstract
Using a large panel of 6,946 French manufacturing firms, this paper investigates the effect of monetary policy on investment from 1990 to 1999 through the cost-of-capital and the cash-flow channels. We compare several specifications of neo-classical demand for capital, taking into account transitory dynamics. The user cost of capital has a significant negative elasticity with respect to capital using traditional Within estimates, or as long as cash-flow is not added to the regression when using Generalised Method of Moments estimates. Asymmetries of effect of monetary policy are evaluated for different groups of firms which differ in terms of informational asymmetries. When dummy variables related to firms which are more sensitive to cash-flow are added in the model, the user cost elasticity is significant again
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
D92 : Microeconomics→Intertemporal Choice→Intertemporal Firm Choice, Investment, Capacity, and Financing
Network
Eurosystem Monetary Transmission Network