Abstract
Using a unique dataset from German small and medium-sized enterprises (SMEs), we test whether pessimistic business expectations have impeded the functioning of the interest rate channel during the post-crisis period. We estimate firms’ user cost elasticity of capital for the period 2008–2015, and test whether this elasticity differs for firms that hold pessimistic business expectations compared with those that hold positive expectations. Our results show that SMEs have significantly responded to changes in the user cost of capital during the post-crisis period. However, the results are mainly driven by SMEs that hold positive business expectations. Firms having neutral or negative expectations depict a much smaller user cost elasticity, which is not statistically different from zero. Our results reveal the limitations of an expansionary monetary policy and confirm the important role that expectations play for firms’ investment decisions.
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Articles in the same Issue
- Editorial
- COVID 19 and Central Banks Dominate the Agenda
- Policy Papers
- The Euro Area Imbalances Narrative in a Franco-German Perspective: The Importance of the Longer-Run View
- Critical Analysis of the Zero Risk Weight Privilege for European Sovereign Debt in Light of Art. 124 TFEU
- Geopolitics, Economic Freedom and Economic Performance
- An Analysis of the Structure of Trade Between Australia and China: An Australian Perspective
- Is the Interest Rate Channel still working? Post-Crisis Evidence from German SMEs
- Collective Decision-making: FIFA from the Perspective of Public Choice
- Policy Forum: Corona and Crisis
- Effectiveness of Corona Lockdowns: Evidence for a Number of Countries
- Homburg’s Lockdown Analysis: Conclusions without Data and an Appropriate Estimation Model
- Reply to Robra and Felder (2020)
- Rejoinder to Homburg
- The COVID-19 Crisis: Policy Recommendations for Japan
- Special Drawing Rights: International Monetary Support for Developing Countries in Times of the COVID-19 Crisis
- The COVID-19 and bond spreads
- How the Corona Pandemic is Plunging the Monetary System into Crisis
Articles in the same Issue
- Editorial
- COVID 19 and Central Banks Dominate the Agenda
- Policy Papers
- The Euro Area Imbalances Narrative in a Franco-German Perspective: The Importance of the Longer-Run View
- Critical Analysis of the Zero Risk Weight Privilege for European Sovereign Debt in Light of Art. 124 TFEU
- Geopolitics, Economic Freedom and Economic Performance
- An Analysis of the Structure of Trade Between Australia and China: An Australian Perspective
- Is the Interest Rate Channel still working? Post-Crisis Evidence from German SMEs
- Collective Decision-making: FIFA from the Perspective of Public Choice
- Policy Forum: Corona and Crisis
- Effectiveness of Corona Lockdowns: Evidence for a Number of Countries
- Homburg’s Lockdown Analysis: Conclusions without Data and an Appropriate Estimation Model
- Reply to Robra and Felder (2020)
- Rejoinder to Homburg
- The COVID-19 Crisis: Policy Recommendations for Japan
- Special Drawing Rights: International Monetary Support for Developing Countries in Times of the COVID-19 Crisis
- The COVID-19 and bond spreads
- How the Corona Pandemic is Plunging the Monetary System into Crisis