Rate uncertainty means firms hire and invest less – BdF study
European companies hoard cash and reduce dividend payments when monetary stance is unclear
A new Banque de France study shows that firms in the eurozone hire fewer people and invest less when they are uncertain about the trajectory of interest rates.
The paper, released on November 4, shows that an increase of one standard deviation in uncertainty corresponds to a 1.5 percentage point reduction in the investment growth rate.
The authors – Anne Duquerroy, Klodiana Istrefi and Sarah Mouabbi – say the effect can be magnified at times. Their sample included the 2007–10 period, when interest
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