Firm investment and monetary policy transmission in the Euro Area
Résumé
This paper presents a comparable set of results on the monetary transmission channels on firm investment (the interest rate channel and the broad credit channel) for the four largest euro-area
countries (Germany, France, Italy and Spain), using particularly rich micro datasets for each
country containing over 215,000 observations from 1985 to 1999. For each of those countries,
investment relationships are estimated explaining investment by its user cost, sales and cash flow.
A first result is that investment is sensitive to user cost changes in all those four countries. This
implies an operative interest channel in these euro-area countries. A second result is that investment
in all countries is 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.
countries (Germany, France, Italy and Spain), using particularly rich micro datasets for each
country containing over 215,000 observations from 1985 to 1999. For each of those countries,
investment relationships are estimated explaining investment by its user cost, sales and cash flow.
A first result is that investment is sensitive to user cost changes in all those four countries. This
implies an operative interest channel in these euro-area countries. A second result is that investment
in all countries is 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.
Domaines
Economies et finances
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