A research paper presented at Jackson Hole showed an interest-rate increase of 1 percentage point can lead to a 25 per cent decline in venture capital investment
both reduces firms’ incentive to innovate by decreasing overall demand, and curtails financial investment through less optimal financial conditions and reduced appetite for risk taking, economists Yueran Ma and Kaspar Zimmermann found. Ma presented the paper at the conference in Jackson Hole, Wyoming, hosted by the Kansas City Fed.
An interest-rate increase of 1 percentage point leads to a 1 per cent to 3 per cent drop in spending on research and development and a 25 per cent decline in venture capital investment in the next one to three years, the authors found.
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