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2004.szeptember 20. Kátay Gábor - Wolf Zoltán: Investment Behavior, User Cost and Monetary Policy Transmission - the Case of Hungary


Az előadás az MNB 443-as Széchenyi termében lesz 15 órától.


The aim of this paper is to shed some light on how monetary impulses are transmitted to the Hungarian nonfinancial corporate sector, namely, to what extent and how business investment reacts to monetary policy decisions. Several previous studies of the literature have tried to capture this relationship but studies using aggregate data have been rather unsuccessful in this respect. The ambiguity of results and the failure to detect significant linkages between variables can attributed to a number of reasons. First, aggregation itself obscures effects that could otherwise be important at the firm level and, as a result, significant parameter estimates are rarely obtained on aggregate data. Second, the endogeneity of aggregate investment and the user cost of capital cause simple OLS parameter estimates to be inconsistent and good instruments are difficult to find at the aggregate level. Third, financial market imperfections are not explicitly taken into account in aggregate models of investments, yet their role is widely accepted in the literature.

Our investigation is micro-founded in the sense of both model development and estimation. This provides at least partial solutions to the above problems. Heterogeneity across firms provides for large variance of the observations, which can be exploited in the identification and the estimation procedure. Also, endogeneity is handled since instruments are easier to obtain at the firm level. Financial market imperfections are also incorporated in our model and its effects are estimated.

At the current stage of the research, our model does not incorporate either uncertainty or irreversibility. Furthermore, it does not aim at modeling costs of capital adjustment explicitly. These issues have been proved to be important but are shortly addressed in the paper. Despite its shortcomings, the model we develop and estimate has the advantage of a clear theoretical background and leads to relatively simple testable hypotheses. Also, our results are derived in a framework similar to that of the Eurosystem Monetary Transmission Network. Hence, comparing those to the firm-level empirical studies of the Eurosystem Monetary Transmission Network is straightforward.

Our research is carried out as part of a project in the Magyar Nemzeti Bank which is aimed at mapping the relevant channels of monetary transmission in Hungary.