Firm Investment and Monetary Policy Transmission in the Euro Area

43 Pages Posted: 22 Dec 2010

See all articles by Jean-Bernard Chatelain

Jean-Bernard Chatelain

Paris School of Economics, Université Paris 1 Panthéon Sorbonne

Andrea Generale

Bank of Italy

Ignacio Hernando

Banco de España

Ulf von Kalckreuth

Deutsche Bundesbank - Economic Research Centre

Philip Vermeulen

European Central Bank (ECB)

Multiple version iconThere are 3 versions of this paper

Date Written: December 2002

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 ex-plore 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 in-vestment 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 channels, user cost of capital

JEL Classification: E22, E50

Suggested Citation

Chatelain, Jean-Bernard and Generale, Andrea and Hernando, Ignacio and von Kalckreuth, Ulf and Vermeulen, Philip, Firm Investment and Monetary Policy Transmission in the Euro Area (December 2002). Available at SSRN: https://ssrn.com/abstract=1728706 or http://dx.doi.org/10.2139/ssrn.1728706

Jean-Bernard Chatelain (Contact Author)

Paris School of Economics, Université Paris 1 Panthéon Sorbonne ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

HOME PAGE: http://www.parisschoolofeconomics.eu/fr/chatelain-jean-bernard/

Andrea Generale

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Ignacio Hernando

Banco de España ( email )

Madrid 28014
Spain
+34 91 338 5186 (Phone)
+34 91 338 5678 (Fax)

Ulf Von Kalckreuth

Deutsche Bundesbank - Economic Research Centre ( email )

Wilhelm-Epstein-Strasse 14
Frankfurt/Main D-60431
Germany

Philip Vermeulen

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
99
Abstract Views
899
rank
116,964
PlumX Metrics