Introduction

In this chapter, which is a summary of Chatelain and Tiomo (2001), we complete the presentation and discussion of the estimated effects of monetary policy on French corporate investment reported in Chatelain et al. (chapter 7 this volume). We focus on the measurement of the impact of the cost of capital channel and the credit channel of monetary policy on individual firms' investment.

On the one hand, the available macroeconomic level evidence shows that the cost of capital channel of monetary policy has no or little effect on corporate investment in France. For instance, neither Amadeus (INSEE), nor Mosaïque (OFCE) nor the model developed by the Banque de France, three French forecasting models developed in the 1990s, include the cost of capital effect on investment. INSEE's Metric model adds a relative factor cost whose parameter is small and not significant (see Assouline et al., 1998). Herbet (2001) published a recent estimation of macroeconomic investment and recognised its failure to incorporate interest rate or user cost effects.

On the other hand, some of the studies that have used sectoral-level data find large and significant investment elasticity to the user cost of capital. Using the BACH European database ‘aggregated by size and sector’, Mojon, Smets and Vermeulen (2001) obtained an elasticity for the user cost of -0.75. Duhautois (2001), who used data aggregated by sector and size from 1985 to 1996 on the basis of the INSEE BIC-BRN, found a real interest rate elasticity of -0.38 for the period 1985–90 and of -0.27 for the period 1991–6.