Firm size and monetary policy transmission: evidence from German business survey data

Arbeitspapier

Using business survey data on German manufacturing firms, this paper provides tests for hypotheses formulated in capital market imperfection theories that predict distributional effects in the transmission mechanism of monetary policy. Effects of monetary policy shocks on the business conditions of firms of several size classes are analysed, with the finding of considerable asymmetry. As predicted by theory, small firms are affected more strongly than large firms. To test whether these effects are reinforced when the economy is in a business cycle downturn, the paper employs a new estimation strategy: impulse response analysis conditional on Markov-switching regimes. The findings are supportive of the theoretical hypotheses: in a business cycle downturn, the distributional effects of monetary policy transmission are indeed reinforced.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 21

Classification and Topics

• Classification: Wirtschaft ; Monetary Policy ; Financial Markets and the Macroeconomy ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
• Subject: balance sheet channel ; firm size ; Markov switching ; Monetary policy transmission

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ehrmann, Michael
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2000

Further information

• Handle: http://hdl.handle.net/10419/152455
• Last update: 10.03.2025, 11:43 AM CET