Quarterly Journal of Economics Vol. 94 No. 3 1980
The Term Structure of Interest Rates and the Demand for Investment
Abstract
This paper examines the question of whether long-term or short-term interest rates should appear in investment demand functions. Three basic models are examined. The first involves a distribution of time lags required to complete investment projects; the second is based on a simple adjustment-costs model; and the third incorporates uncertainty and risk aversion. The major conclusion is that, except for some special cases which are probably quite unrealistic, both long-term and short-term interest rates affect investment demand.
- DOI
- 10.2307/1884586
- Volume
- 94
- Issue
- 3
- Pages
- 591
- Sources
- openalex crossref