Arbeitspapier
Does inflation harm corporate investment? Empirical evidence from OECD countries
Theoretical models point at various channels of the impact of inflation on corporate investment. This article attempts to answer the question what are the direction and strength of this possible impact examining the relationship between corporate investment and inflation on the sample of 21 OECD countries in the years 1960-2005. The obtained negative relationship, statistically and economically significant, proves robust to changes in the specification of the estimated equation, estimators, frequency of variables used in the study and analysed period. Moreover, the results obtained suggest nonlinear character of this relationship: marginal effect on corporate investment is higher at inflation rates between 3 and 5.5 per cent. These results suggest that the impact of inflation on corporate investment dynamics may be the source of nonlinear nature of the relationship between GDP growth and inflation identified in previous empirical studies. Finally, taking into account the direct impact of inflation on investment, variables approximating the cost of capital utilisation prove to be statistically insignificant determinants of corporate investment.
- Language
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Englisch
- Bibliographic citation
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Series: Economics Discussion Papers ; No. 2012-63
- Classification
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Wirtschaft
Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models
Price Level; Inflation; Deflation
Criteria for Decision-Making under Risk and Uncertainty
Firm Behavior: Empirical Analysis
International Business Cycles
- Subject
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investment
inflation
panel data models
monetary policy
- Event
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Geistige Schöpfung
- (who)
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Ciżkowicz, Piotr
Rzońca, Andrzej
- Event
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Veröffentlichung
- (who)
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Kiel Institute for the World Economy (IfW)
- (where)
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Kiel
- (when)
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2012
- Handle
- Last update
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10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Ciżkowicz, Piotr
- Rzońca, Andrzej
- Kiel Institute for the World Economy (IfW)
Time of origin
- 2012
Other Objects (12)
Does inflation harm corporate investment? Empirical evidence from OECD countries
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Does inflation harm corporate investment? Empirical evidence from OECD countries
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Corporate investment policy
Inflation protected investment strategies
Inflation and risky investments
OECD principles of corporate governance
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Globalisation and inflation in OECD countries
Globalisation and Inflation in OECD Countries