This paper proposes a new framework for studying the effects of monetary policy on business investment. Important ambiguities with the modeling of investment dynamics and interactions between real and financial decisions suggest modeling investment spending as a VAR. Based on a panel of...

The interpretation of the significant relation between business investment spending and cash flow has been controversial. A large body of research has found that investment/cash flow sensitivities are higher for financially constrained firms. This fundamental result underlying the finance...

The transmission channels through which monetary policy affects business investment remain opaque. This paper examines the importance of the interest rate and credit channels on business fixed investment in Germany. We have at our disposal three uniquely rich data sets - a panel of financial...