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On the effect of high energy prices on investment

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  • Jan Jacobs
  • Gerard Kuper
  • Daan van Soest

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.

Suggested Citation

  • Jan Jacobs & Gerard Kuper & Daan van Soest, 2009. "On the effect of high energy prices on investment," Applied Economics, Taylor & Francis Journals, vol. 41(27), pages 3483-3490.
  • Handle: RePEc:taf:applec:v:41:y:2009:i:27:p:3483-3490
    DOI: 10.1080/00036840701537794
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    Cited by:

    1. Spyros Arvanitis & Marius Ley, 2013. "Factors Determining the Adoption of Energy-Saving Technologies in Swiss Firms: An Analysis Based on Micro Data," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 54(3), pages 389-417, March.
    2. Dhaoui, Abderrazak & Khraief, Naceur, 2014. "Empirical linkage between oil price and stock market returns and volatility: Evidence from international developed markets," Economics Discussion Papers 2014-12, Kiel Institute for the World Economy (IfW).
    3. Spyros Arvanitis & Marius Christian Ley, 2010. "Factors Determining the Adoption of Energy-saving Technologies in Swiss Firms," KOF Working papers 10-257, KOF Swiss Economic Institute, ETH Zurich.
    4. Spyros Arvanitis & Michael Peneder & Christian Rammer & Tobias Stucki & Martin W├Ârter, 2016. "The adoption of green energy technologies: The role of policies in an international comparison," KOF Working papers 16-411, KOF Swiss Economic Institute, ETH Zurich.
    5. Ibrahim Halil Eksi & Mehmet Senturk & H. Semih Yildirim, 2012. "Sensitivity of Stock Market Indices to Oil Prices: Evidence from Manufacturing Sub-Sectors in Turkey," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 59(4), pages 463-474, September.

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