How stimulative are low real interest rates for intangible capital?
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- dc.contributor.author Caggese, Andrea
- dc.contributor.author Pérez Orive, Ander
- dc.date.accessioned 2023-07-17T07:05:17Z
- dc.date.available 2023-07-17T07:05:17Z
- dc.date.issued 2022
- dc.description.abstract We study theoretically and empirically how the increase in the intensity of intangible capital in production in recent decades affects the sensitivity of investment to interest rates. In contrast to tangible capital, intangible capital has low collateral value and must be financed in a larger part with accumulated corporate savings, especially in more financially constrained firms and for more lumpy investments. High-intangibles firms are, therefore, more likely to be net savers in equilibrium, and for such firms low interest rates are not as stimulative as for high-tangibles firms. We show in a realistically calibrated model that the rise of intangible capital substantially dampens the positive effects of low interest rates on investment because of this mechanism, increasing the misallocation of resources. We find strong empirical support for this effect by studying the investment decisions of U.S. firms.
- dc.format.mimetype application/pdf
- dc.identifier.citation Caggese A, Pérez-Orive A. How stimulative are low real interest rates for intangible capital?. Eur Econ Rev. 2022;142:103987. DOI: 10.1016/j.euroecorev.2021.103987
- dc.identifier.doi http://dx.doi.org/10.1016/j.euroecorev.2021.103987
- dc.identifier.issn 0014-2921
- dc.identifier.uri http://hdl.handle.net/10230/57588
- dc.language.iso eng
- dc.publisher Elsevier
- dc.relation.ispartof European Economic Review. 2022;142:103987.
- dc.rights Published by Elsevier B.V. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
- dc.rights.accessRights info:eu-repo/semantics/openAccess
- dc.rights.uri http://creativecommons.org/licenses/by/4.0/
- dc.subject.keyword Intangible capital
- dc.subject.keyword Borrowing constraints
- dc.subject.keyword Interest rates
- dc.subject.keyword Capital misallocation
- dc.title How stimulative are low real interest rates for intangible capital?
- dc.type info:eu-repo/semantics/article
- dc.type.version info:eu-repo/semantics/acceptedVersion