The interest rate and credit channel in Belgium: an investigation with micro-level firm data

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 JEL Classification: C23, D21, E50credit channel, Investment, monetary transmission, panel data

The interest rate and credit channels in Belgium: An investigation with micro-level firm data

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.Investment, Monetary transmission, Credit channel, Panel data

The interest rate and credit channels in Belgium: an investigation with micro-level firm data

This paper investigates the effects of monetary policy on firms\u2019 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.Investment, Monetary transmission, Credit channel, Panel data

The impact of uncertainty on investment plans

In this paper we investigate how demand and output price uncertainty affect investment plans of Belgian manufacturing firms. We obtain time-varying uncertainty measures at the firm and industry level from the Belgian monthly business cycle survey and investment plans from the half-yearly investment survey. Using investment plans instead of realised investment data, e.g. annual accounts data, is, from an informative point of view, superior since it is more likely to reveal the features of the decision formation process and, therefore, it is most closely related to economic theory. Business investment is normally planned well in advance, because it involves time and costs to implement, and theory describes the behaviour of firms at the moment of their decision, which can be assumed to be fully captured in survey data. In order to find robust predictions we estimate three different specifications, each of which can be considered as a benchmark in the literature: two reduced form equations and a structural Euler equation. Our results show that uncertainty depresses investment. These results hold for industry- as well as for firmspecific demand uncertainty. Moreover, referring to Euler equation, uncertainty postpones investment today in favour of investment tomorrow. This effect is stronger for firms with more irreversible investment. Hence, our results seem to confirm to predictions of the real option theory.investment, uncertainty, irreversibility, real options, survey data

Kiri Ludolph Stephanile, Peterburi

http://tartu.ester.ee/record=b1845659~S1*es

2 kirja Karl Morgensternile, St. Petersburg

http://tartu.ester.ee/record=b1845664~S1*es

5 kirja Karl Morgensternile, St. Petersburg

http://tartu.ester.ee/record=b1811219~S1*es