The Balance Sheet Channel of Monetary Policy Transmission: Evidence from the UK

Eleni Angelopoulou and Heather Gibson

No 53, Working Papers from Bank of Greece

Abstract: This paper examines the sensitivity of investment to cash flow using a panel of UK firms in manufacturing with a view to shedding some light on the existence of a balance sheet channel or financial accelerator. In addition to examining the impact of cash flow in different subsamples based on company size or financial policy (dividend payouts, share issues and debt accumulation), we also investigate the extent to which investment becomes more sensitive to cash flow in periods of monetary tightness. To this end, we employ a monetary tightness indicator constructed for the UK using the narrative approach pioneered by Romer and Romer. The results provide some support for the view that UK firms show greater investment sensitivity to cash flow during periods of tight monetary policy.

Keywords: Financial Constraints; Balance Sheet Channel, Investment. (search for similar items in EconPapers)
JEL-codes: E22 E44 E52 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2007-01
New Economics Papers: this item is included in nep-acc, nep-cba, nep-mac and nep-mon
References: Add references at CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://www.bankofgreece.gr/BogEkdoseis/Paper200753.pdf Full Text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bog:wpaper:53

Access Statistics for this paper

More papers in Working Papers from Bank of Greece Contact information at EDIRC.
Bibliographic data for series maintained by Anastasios Rizos ().