On the effect of high energy prices on investment

J.P.A.M. Jacobs, G.H. Kuper, D.P. van Soest

Research output: Contribution to journalArticleScientificpeer-review

Abstract

Empirical analyses of firm behaviour typically assume that there is a stable relationship between investment on the one hand and changes in the relative prices of inputs, output demand and other determinants on the other hand. However, because of the lumpy nature and irreversibility of investments and the presence of uncertainty about future economic developments, a specific percentage change in relative prices and output demand may not always lead to the same percentage change in capital stocks. That means that different regimes may exist in investment behaviour. We test whether such regimes exist using high-quality data on eight manufacturing industries in the Netherlands. Three different regimes can be identified that are characterized by differences in the relative input price levels and we find that if relative prices take on extreme values, the propensity to adjust the scale of production to changes in demand is very low.
Original languageEnglish
Pages (from-to)3483-3490
JournalApplied Economics
Volume41
Issue number27
Publication statusPublished - 2009

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Energy prices
Relative prices
Economic development
Uncertainty
Irreversibility
Manufacturing industries
Investment behavior
Firm behavior
Price level
Extreme values
Capital stock
Input prices
Data quality
Propensity
The Netherlands

Cite this

Jacobs, J. P. A. M., Kuper, G. H., & van Soest, D. P. (2009). On the effect of high energy prices on investment. Applied Economics, 41(27), 3483-3490.
Jacobs, J.P.A.M. ; Kuper, G.H. ; van Soest, D.P. / On the effect of high energy prices on investment. In: Applied Economics. 2009 ; Vol. 41, No. 27. pp. 3483-3490.
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Jacobs, JPAM, Kuper, GH & van Soest, DP 2009, 'On the effect of high energy prices on investment' Applied Economics, vol. 41, no. 27, pp. 3483-3490.

On the effect of high energy prices on investment. / Jacobs, J.P.A.M.; Kuper, G.H.; van Soest, D.P.

In: Applied Economics, Vol. 41, No. 27, 2009, p. 3483-3490.

Research output: Contribution to journalArticleScientificpeer-review

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