Investment choice and inflation uncertainty

Fischer, Gregory (2013) Investment choice and inflation uncertainty. . London School of Economics and Political Science, London, UK.

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Abstract

This paper investigates the relationship between infation uncertainty and investment using a panel of loan-level data from small businesses. Micro-level data makes it possible to study phenomena that are obscured in country or industry aggregates. The data show that periods of increased inflation uncertainty are associated with substantial reductions in total investment. Moreover, there is a shift in the composition of investment away from fixed assets and towards working capital - the more flexible factor of production - and fixed asset investment exhibits periods of inaction consistent with real option models of investment under uncertainty.

Item Type:	Monograph (Working Paper)
Official URL:	http://www.lse.ac.uk/
Additional Information:	© 2013 The Author
Divisions:	Economics
Subjects:	H Social Sciences > HC Economic History and Conditions
JEL classification:	D - Microeconomics > D9 - Intertemporal Choice and Growth > D92 - Intertemporal Firm Choice and Growth, Investment, or Financing E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E22 - Capital; Investment (including Inventories); Capacity E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level; Inflation; Deflation G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
Date Deposited:	11 Nov 2013 14:55
Last Modified:	13 Sep 2024 20:25
URI:	http://eprints.lse.ac.uk/id/eprint/54259

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