Impact of Inflation and Interest Rate Volatility on Corporate Strategy: A Mixed-Methods Investigation

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This study investigates the multifaceted impact of inflation and interest rate volatility on corporate strategic decision-making through a comprehensive mixed-methods approach.Drawing on recent empirical evidence from 2022-2026, we integrate quantitative econometric analyses with qualitative case insights to examine how macroeconomic uncertainty shapes firm-level investment, financing, pricing, and risk management strategies.Our quantitative strand employs panel regression models with GARCH-based volatility measures, analyzing heterogeneous effects across firm size, leverage, and sectoral characteristics.Results reveal that interest rate volatility significantly reduces capital expenditures among young and highly leveraged firms, while inflation exhibits context-dependent effects on profitability and investment timing.The qualitative strand, comprising executive interviews and comparative case studies, uncovers strategic responses including real options-based investment staging, dynamic hedging programs, and pricing power exploitation.We develop an integrated conceptual model synthesizing real options theory, monetary transmission mechanisms, and agency theory to explain observed strategic adaptations.Findings demonstrate that monetary policy credibility moderates the adverse effects of expectation disagreements on business confidence, while limited nominal indexation amplifies investment sensitivity to unanticipated inflation.This research contributes to corporate finance literature by providing empirical evidence of mixed-methodology approaches in capturing the complexity of macroeconomic-strategy linkages, offering actionable insights for executives navigating volatile economic environments, and identifying critical boundary conditions under which inflation and interest rate shocks differentially affect strategic choices across heterogeneous firm populations.

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