Investment, the Cost of Capital, and Monetary Policy in the Nineties in France: A Panel Data Investigation
51 Pages Posted: 19 Dec 2002
There are 2 versions of this paper
Investment, the Cost of Capital, and Monetary Policy in the Nineties in France: A Panel Data Investigation
Investment, the Cost of Capital and Monetary Policy in the Nineties in France: A Panel Data Investigation
Date Written: December 2001
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 to 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.
Keywords: Investment, Monetary Policy, Generalised Method of Moments, Cost of Capital
JEL Classification: C23, D21, D92
Suggested Citation: Suggested Citation
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