Firm Investment – Assessing the Federal Stimulus Package’s Effect on Firm Investment
The paper explores in detail the theoretical and practical implications of financial asset management. It goes through the interrelated concepts of asset allocation, firm size and financial liquidity. The paper then goes through a detailed exploration of the current literature related to financial asset management. It then goes through a detailed dissection of the issues of efficiency and risk as they relate to firm size, financial liquidity and asset allocation.
Financial theory is primarily concerned with the macro-economic effects of changes in firms’ investments as reflected in their externalities. The theory then goes on to describe how these changes affect firm investment efficiency. Finally, the paper discusses the role of government intervention in the economy through various governmental programs. Government interventions include policy frameworks and rules, as well as policies designed to support or mitigate the effects of shocks to the economy.
One policy measure that has been adopted by many governments across many countries is the fiscal stimulus package introduced in Australia in the wake of the global recession. The policy has seen many positive effects across a wide range of businesses across many industries. However, the package has not been able to significantly improve firms’ investment efficiency. As such, it is relatively inefficient as it only masks the presence of economic slack in the economy.
The literature on firm investments also deals with the question of how the introduction of a fiscal stimulus package and rules may affect firm investments over the long run. The authors argue that even short-term changes in tax and subsidies can affect firm investments. Furthermore, the authors argue that the effects of the package may not be so visible during the first few years (the period immediately after the recession), due to the fact that capital flows are normally smooth at this point. However, the situation reverses rapidly as the recovery phase begins. During this time, the effects of the government intervention are visible and there is a clear reduction in capital stocks.
The study thus concludes that although the introduction of the fiscal stimulus program may lead to more immediate improvements in productivity and profitability, the long-run impact is still unclear. The uncertainty stems from the negative assumption that economic spending and increased bank lending can stimulate demand and improve economic performance over the long run. Further research would shed more light on the subject.
This conclusion is not altogether wrong but also faces several limitations. First, the focus here is on the analysis of macro firms, which are usually of greater significance than the domestic ones. Second, as mentioned above, the analysis only focuses on the post-recession period, when the effects of the fiscal policy are visible. When the economic stimulus package is withdrawn later, what will happen to the invested capital is not considered. In addition, the analysis only focuses on capital expenditures and not savings or income, which could be affected by government interventions.
