Gulnara Nolan

Tax, cost of capital, and investment

/0 Comments/in /by

Last time I discussed the relationship between the cost of capital and investment.

Given that motivation, the goal of this post is to understand whether investment is responsive to changes in the UCC due to changes in tax settings. This does two things:

  • Provides evidence regarding whether the capital stock will ultimately be influenced by corporate tax policy changes.
  • Helps us understand how changes in the cost of capital can “shift” investment through time, thereby helping economic stabilisation. Note: The cost of capital varies with both taxes and interest rates, so this relates across to monetary policy!
Read more
Matt Nolan

Finally finished my PhD!

/0 Comments/in /by

Hey TVHE. Back in the day I used to write on this site, but then all the interesting feedback and discussion on this site convinced me to do my PhD – and yesterday I finally got it awarded.

Just wanted to say thanks! If it wasn’t for the active discussion here and the passionate New Zealand economics community I would never have done it.

Read more
Gulnara Nolan

What is the cost of capital and investment link?

/0 Comments/in /by

In this post I intend to motivate research that is underway by Lynda Sanderson and myself on the investment behaviour of New Zealand firms. [“Taxation, user cost of capital and investment behaviour of NZ firms” forthcoming]

The goal of our current research is to understand how changes in tax settings in New Zealand have influenced the investment behaviour of firms.  Doing this involves thinking about how taxation can influence investment. The key channel it does so is by influencing the price associated with investment – what is called the user cost of capital.

Read more
Andrew Coleman

The Big Australians

/0 Comments/in , /by

One of the most fortunate things about being a New Zealander is that we are close to Australia and we have the right to live and work there. This is not just because Australia does many things very well, but simply because Australia is such a wonderful place.

Looking back, I can’t believe I only lived there for twelve months, given how much I enjoyed the experience. One day I shall kick myself, or possibly ask an Australian to do it for me since they will know how to make a good job of that too.

Read more
Gulnara Nolan

Do we make choices based on income or prices?

/0 Comments/in /by

Last time we noted the following regarding thinking about NGDP level targeting:

To understand what is going on we need to ask what expectations are being “set”, what is the “target” and how do these reflect what a central bank can “do”?

Expectations: We know they can be adaptive (backward looking) or rational (forward looking), but what do they refer to? Are people making choices based on expected prices, or are they making choices based on expected incomes? Do they view shocks as permanent or temporary?

Target: Is the goal to anchor the price level, or to anchor the level of expected nominal income growth? Is it to limit variability in prices and output?

What they do: If a central bank wants to increase prices can it, if it wants to increase nominal incomes can it?  If they can do both, how does this influence their ability to “close output gaps”?

Here I want to discuss a little more about expectations.

Read more
Andrew Coleman

Small town dynamics

/0 Comments/in , , /by

By international standards, New Zealand is a small town economy. True, Auckland now has more than 1.5 million people, but by global metrics this is not very large. In 2010 there were 449 cities with more than 1 million residents, and Auckland was ranked 307 in terms of population. Small beans indeed – even if Auckland is four times as large as the next two biggest cities in New Zealand.

So how does this small size influence outcomes for New Zealanders?

Read more