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The Effects of Inflation and Taxes on Growth Investments and Replacement Policies
Author(s) -
BRENNER MENACHEM,
VENEZIA ITZHAK
Publication year - 1983
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1983.tb03838.x
Subject(s) - economics , inflation (cosmology) , duration (music) , monetary economics , capital (architecture) , macroeconomics , investment (military) , art , physics , literature , archaeology , politics , theoretical physics , political science , law , history
ABSTRACT This paper investigates the effect of inflation and taxes on the optimal duration of investments. The main conclusion is that inflation does not always increase the duration of investments. For example, in the case of equipment with a short replacement cycle, increased inflation tends to decrease the duration of the cycle. Contrary to the common theoretical analysis, these results imply that inflation may increase some forms of capital investments.