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WP 2004/12 Gábor Kátay - Zoltán Wolf: Investment Behavior, User Cost and Monetary Policy Transmission - the Case of Hungary

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Abstract

In this paper we investigate corporate investment behavior using a large panel of Hungarian firms between 1993 and 2002. The standard neoclassifical framework is used to derive empirically feasible specifications, however, several other issues beyond the scope of the framework are also addressed. We draw on the line of research carried out previously in the Eurosystem Monetary Transmission Network (EMTN). Our results are, by and large, similar to those obtained within the EMTN. Namely, the effect of user cost changes on investment is significant and robust across several specifications providing strong evidence against simple sales-accelerator models of investment. Firms' cash-flow proved to be a significant determinant of corporate investment, which suggests that financial variables do matter for firms.  

JEL classification: C23, D21, D92, E22, E50 C23, D21, D92, E22, E50

Keywords: investment, monetary transmission, user cost of capital, credit channel, panel data   WP2004_12