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- Title
INVESTMENT AND THE NOMINAL INTEREST RATE: THE VARIABLE VELOCITY CASE.
- Authors
Koenig, Evan F.
- Abstract
Models treating money either as a consumer good or as a producer good are encompassed by a model in which both households and firms use money as a buffer between receipts and expenditures. A rise in nominal interest rates increases resources devoted to intermediation, while discouraging purchases financed from accumulated cash. If investment is financed from contemporaneous earnings, there is a tendency to substitute out of consumption and into investment when interest rates are high. Greater resources devoted to intermediation generate a negative wealth effect. The net impact on investment is ambiguous.
- Subjects
MONEY; INTEREST rates; INTERMEDIATION (Finance); INVESTMENTS
- Publication
Economic Inquiry, 1989, Vol 27, Issue 2, p325
- ISSN
0095-2583
- Publication type
Article
- DOI
10.1111/j.1465-7295.1989.tb00785.x