Interest rates and the timing of new production

Boyan Jovanovic () and Peter Rousseau

Economic Perspectives, 2004, vol. 28, issue Q IV, 2-11

Abstract: This article studies the relation between IPO investment and the rate of interest. The 1950s and early 1960s, especially, were periods of very low real interest rates, and IPO investment was very low, with firms delaying their IPOs significantly. The authors find a qualitative difference between investment of IPO-ing firms and the investment of incumbent firms. The latter is decreasing in the interest rate, as neoclassical theory predicts. On the other hand, very low interest rates tend to discourage IPOs, and this may be why the 1950s and 1960s contained few IPOs.

Keywords: Interest rates; Investments (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (2)

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