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How does uncertainty about interest rates affect firms?
[Comment l’incertitude sur les taux d’intérêt affecte-t-elle les entreprises ?]

Author

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  • Anne Duquerroy
  • Klodiana Istrefi
  • Sarah Mouabbi

Abstract

When interest rate uncertainty rises, euro area firms reduce their future investments and hiring, and adopt a more cautious approach by hoarding cash and cutting dividends. The negative effect on investment is magnified for firms with financial and capital constraints, or without hedging strategies. Quand l’incertitude sur les taux d’intérêt s’accroît, les entreprises de la zone euro réduisent leurs investissements futurs et leurs embauches. Elles adoptent également une approche plus prudente en augmentant leur liquidité et en réduisant les dividendes. L’effet négatif sur l’investissement est amplifié pour les entreprises confrontées à des contraintes financières et de fonds propres, ou dépourvues de stratégies de couverture.

Suggested Citation

  • Anne Duquerroy & Klodiana Istrefi & Sarah Mouabbi, . "How does uncertainty about interest rates affect firms? [Comment l’incertitude sur les taux d’intérêt affecte-t-elle les entreprises ?]," Eco Notepad (in progress), Banque de France.
    • Handle: RePEc:bfr:econot:373
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