Investment, the Cost of Capital, and Monetary Policy in the Nineties in France: A Panel Data Investigation

51 Pages Posted: 19 Dec 2002

See all articles by Jean-Bernard Chatelain

Jean-Bernard Chatelain

Paris School of Economics, Université Paris 1 Panthéon Sorbonne

André Tiomo

affiliation not provided to SSRN

Multiple version iconThere are 2 versions of this paper

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

Chatelain, Jean-Bernard and Tiomo, André, Investment, the Cost of Capital, and Monetary Policy in the Nineties in France: A Panel Data Investigation (December 2001). Available at SSRN: https://ssrn.com/abstract=356701 or http://dx.doi.org/10.2139/ssrn.356701

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/

André Tiomo

affiliation not provided to SSRN

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