Journal
JOURNAL OF BANKING & FINANCE
Volume 26, Issue 11, Pages 2111-2129Publisher
ELSEVIER
DOI: 10.1016/S0378-4266(02)00202-9
Keywords
euro area; firms' investment; monetary policy
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This paper analyses the effects of a change in monetary policy on firms' investment in Germany, France, Italy and Spain using a data set which provides aggregated balance sheet and profit and loss account data for 17 different industries and three different size classes. The main findings are twofold. First, in each of the four countries a change in the user cost of capital, which in turn is affected by interest rates, has both statistically and economically significant effects on investment. Second, while the average interest rate on debt is generally higher for small firms than for large firms, there is little evidence that the effects of monetary policy on small firms are larger. (C) 2002 Elsevier Science B.V. All rights reserved.
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