Interest rates and backward-bending investment
By: Raj Chetty.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10354; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10354.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Interest rates -- Econometric models.; Capital investments -- Econometric models.
Description: "This paper shows that interest rate reductions do not necessarily stimulate investment in an environment with uncertainty and adjustment costs.  When firms making lumpy investment decisions can acquire information about profitability by delaying, aggregate investment demand is always a backward-bending function of the interest rate.  An interest rate increase is more likely to stimulate investment when the potential to learn is larger and in the short run rather than the long run.  The average observed profit rate is also a backward-bending function of the interest rate when firms learn over time"--National Bureau of Economic Research web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 1/18/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.