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2018 | OriginalPaper | Buchkapitel

20. The Role of the Central Bank and Commercial Banks in Creating and Maintaining a Favorable Investment Climate in the Country

verfasst von : Peter Brusov, Tatiana Filatova, Natali Orekhova, Mukhadin Eskindarov

Erschienen in: Modern Corporate Finance, Investments, Taxation and Ratings

Verlag: Springer International Publishing

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Abstract

In this chapter we study the role of the Central Bank and commercial banks in creating and maintaining a favorable investment climate in the country. Within the framework of modern investment models created by the authors, the dependence of the efficiency of investments on the level of debt financing within a wide range of values of equity costs and debt capital costs under different project terms (long-term projects as well as projects of arbitrary duration) and different investment profitability coefficients β is investigated. The effectiveness of investments is determined by Net Present Value, NPV. The study is conducted within the framework of investment models with debt repayment at the end of the project term.

It is found that NPV depends practically linearly on leverage level L, increasing or decreasing depending on profitability coefficient β and credit rate values k _d. The cutoff credit rate values k _d*, separating the range of increasing NPV(L) from range of decreasing NPV(L), are determined. The Central Bank should keep its key rate at the level which allow commercial banks to keep their credit rates below the cutoff credit rate k _d* values in order to create and maintain a favorable investment climate in the country.

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Titel: The Role of the Central Bank and Commercial Banks in Creating and Maintaining a Favorable Investment Climate in the Country
verfasst von: Peter Brusov
Tatiana Filatova
Natali Orekhova
Mukhadin Eskindarov
Verlag: Springer International Publishing
Buch: Modern Corporate Finance, Investments, Taxation and Ratings
Print ISBN: 978-3-319-99685-1

Electronic ISBN: 978-3-319-99686-8

Copyright-Jahr: 2018
DOI: https://doi.org/10.1007/978-3-319-99686-8_20