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- Title
The Effects of Inflation and Taxes on Growth Investments and Replacement Policies.
- Authors
BRENNER, MENACHEM; VENEZIA, ITZHAK
- Abstract
This paper investigates the effect of inflation and taxes on the optimal duration of investments. The main conclusion is that inflation does not always increase the duration of investments. For example, in the case of equipment with a short replacement cycle, increased inflation tends to decrease the duration of the cycle. Contrary to the common theoretical analysis, these results imply that inflation may increase some forms of capital investments. This paper investigates the effect of inflation and taxes on the optimal duration of investments. The main conclusion is that inflation does not always increase the duration of investments. For example, in the case of equipment with a short replacement cycle, increased inflation tends to decrease the duration of the cycle. Contrary to the common theoretical analysis, these results imply that inflation may increase some forms of capital investments.
- Subjects
PRICE inflation; EFFECT of inflation on investments; CAPITAL investments; INVESTMENT tax credit; RETURN on capital employed; REINVESTMENT
- Publication
Journal of Finance (Wiley-Blackwell), 1983, Vol 38, Issue 5, p1519
- ISSN
0022-1082
- Publication type
Article
- DOI
10.1111/j.1540-6261.1983.tb03838.x