The Interest Rate and Credit Channels in Belgium: An Investigation with Micro-Level Firm Data
National Bank of Belgium Working Paper No. 18
51 Pages Posted: 6 Nov 2010
There are 2 versions of this paper
The Interest Rate and Credit Channels in Belgium: An Investigation with Micro-Level Firm Data
Date Written: December 1, 2001
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.
Keywords: Investment, Monetary Transmission, Credit Channel, Panel Data
JEL Classification: C23, D21, E50
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
By Jacques Mairesse, Bronwyn H. Hall, ...
-
Firm Level Investment and R&D in France and the United States: A Comparison
By Benoit Mulkay, Bronwyn H. Hall, ...
-
Firm Investment and Monetary Policy Transmission in the Euro Area
By Jean-bernard Chatelain, Andrea Generale, ...
-
Firm Investment and Monetary Policy Transmission in the Euro Area
By Jean-bernard Chatelain, Andrea Generale, ...
-
Business Fixed Investment: Evidence of a Financial Accelerator in Europe
-
Does Monetary Policy Have Asymmetric Effects? A Look at the Investment Decisions of Italian Firms
By Eugenio Gaiotti and Andrea Generale
-
Investment and Monetary Policy in the Euro Area
By Benoit Mojon, Frank Smets, ...