Monday, May 12, 2014

Small Business Investment in the Era of Rising Interest Rates

Its been a while since I've posted here. Its because the majority of my published work know takes place at our new and improved site, But I thought I'd do an update here as well; can't hurt to present a wider target.

As I haven't mentioned here, the main impetus for my migration to the new site was the fact that I needed the capacity to post Excel spreadsheets and downloadable pdfs. In fact, my website as it now exists is pretty much exactly what I wanted this blog to be from the get-go. And it only took three years!

Anyway, I'm working on a new white paper (pun intended) about a thing I thought of today. The Fed is indicating that it (they?) may/will/should raise interest rates in about a year. That got my thinking about how project selection will change in an era of moderate-to-normal interest rates; my entire economics education has taken place since the ZLB set in.

One implication I thought of today (and my spreadsheet model friends confirmed!) was that as interest rates rise, smaller projects with lower cash flows have higher present values than expensive projects with larger cash flows. I suspect a fact of this is that smaller investment projects currently on the sidelines become more attractive than the big projects that make sense with low rates.

Again, check it out at Got to drive that traffic.

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