The Role of the Discount Rate in Investment and Employment Decisions

Stig Vinther Møller; Richard Priestley

doi:10.1017/S0022109021000715

The Role of the Discount Rate in Investment and Employment Decisions

Institut for Økonomi

Publikation: Bidrag til tidsskrift/Konferencebidrag i tidsskrift /Bidrag til avis › Tidsskriftartikel › Forskning › peer review

1 Citationer (Scopus)

Abstract

Time variation in the discount rate affects investment and employment decisions in a manner consistent with Q-theory predictions. This evidence is uncovered when using cyclical consumption as a proxy for the discount rate. The results, which are consistent across both U.S. and international data, suggest that firms respond rationally to variations in the cost of capital and that the discount rate has a substantial impact on macroeconomic dynamics and hence business cycle fluctuations.

Originalsprog	Engelsk
Tidsskrift	Journal of Financial and Quantitative Analysis
Vol/bind	58
Nummer	2
Sider (fra-til)	914-938
ISSN	0022-1090
DOI	https://doi.org/10.1017/S0022109021000715
Status	Udgivet - mar. 2023

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10.1017/S0022109021000715

Citationsformater

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abstract = "Time variation in the discount rate affects investment and employment decisions in a manner consistent with Q-theory predictions. This evidence is uncovered when using cyclical consumption as a proxy for the discount rate. The results, which are consistent across both U.S. and international data, suggest that firms respond rationally to variations in the cost of capital and that the discount rate has a substantial impact on macroeconomic dynamics and hence business cycle fluctuations.",

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AB - Time variation in the discount rate affects investment and employment decisions in a manner consistent with Q-theory predictions. This evidence is uncovered when using cyclical consumption as a proxy for the discount rate. The results, which are consistent across both U.S. and international data, suggest that firms respond rationally to variations in the cost of capital and that the discount rate has a substantial impact on macroeconomic dynamics and hence business cycle fluctuations.

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DO - 10.1017/S0022109021000715

M3 - Journal article

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The Role of the Discount Rate in Investment and Employment Decisions

Abstract

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