Advanced Search
MyIDEAS: Login to save this article or follow this journal

Investment and Uncertainty: A Theory-based Empirical Approach

Contents:

Author Info

  • Mikael Carlsson

Abstract

This paper provides empirical evidence on the dynamic effects of uncertainty on firm-level capital accumulation. A novelty in this paper is that the firm-level uncertainty indicator is motivated and derived from a theoretical model, the neoclassical investment model with time to build. This model also serves as the base for the empirical work, where an error-correction approach is employed. I find a negative effect of uncertainty on capital accumulation, both in the short run and the long run. This outcome cannot be explained by the model alone. Instead, the results suggest that the predominant mechanism at work stems from irreversibility constraints. Copyright 2007 Blackwell Publishing Ltd.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0084.2007.00464.x
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Department of Economics, University of Oxford in its journal Oxford Bulletin of Economics and Statistics.

Volume (Year): 69 (2007)
Issue (Month): 5 (October)
Pages: 603-617

as in new window
Handle: RePEc:bla:obuest:v:69:y:2007:i:5:p:603-617

Contact details of provider:
Postal: Manor Rd. Building, Oxford, OX1 3UQ
Email:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0305-9049
More information through EDIRC

Order Information:
Web: http://www.blackwellpublishing.com/subs.asp?ref=0305-9049

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, Econometric Society, vol. 49(6), pages 1417-26, November.
  2. Abel, Andrew B, 1983. "Optimal Investment under Uncertainty," American Economic Review, American Economic Association, American Economic Association, vol. 73(1), pages 228-33, March.
  3. Bronwyn Hall & Jacques Mairesse, 1998. "Firm-Level Investment in France and the United States: An exploration of what we have learned in twenty years," Economics Series Working Papers 1998-W09, University of Oxford, Department of Economics.
  4. Leahy, John V & Whited, Toni M, 1996. "The Effect of Uncertainty on Investment: Some Stylized Facts," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 28(1), pages 64-83, February.
  5. Carlsson, Mikael & Laséen, Stefan, 2001. "Capital Adjustment Patterns in Swedish Manufacturing Firms: What Model do they Suggest?," Working Paper Series, Uppsala University, Department of Economics 2001:15, Uppsala University, Department of Economics.
  6. Alan Carruth & Andy Dickerson & Andrew Henley, 1998. "What Do We Know About Investment Under Uncertainty?," Studies in Economics, Department of Economics, University of Kent 9804, Department of Economics, University of Kent.
  7. Caballero, Ricardo J., 1999. "Aggregate investment," Handbook of Macroeconomics, Elsevier, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 12, pages 813-862 Elsevier.
  8. Ricardo J. Caballero & Eduardo M. R. A. Engel & John C. Haltiwanger, 1995. "Plant-Level Adjustment and Aggregate Investment Dynamics," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 1-54.
  9. Chirinko, Robert S & Schaller, Huntley, 1995. "Why Does Liquidity Matter in Investment Equations?," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 27(2), pages 527-48, May.
  10. Mikael Carlsson, 2003. "Measures of Technology and the Short-run Response to Technology Shocks," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 105(4), pages 555-579, December.
  11. Nicholas Bloom & Steve Bond & John Van Reenen, 2001. "The dynamics of investment under uncertainty," IFS Working Papers, Institute for Fiscal Studies W01/05, Institute for Fiscal Studies.
  12. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  13. Vivek Ghosal & Prakash Loungani, 2000. "The Differential Impact of Uncertainty on Investment in Small and Large Businesses," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 338-343, May.
  14. Pindyck, Robert S, 1993. "A Note on Competitive Investment under Uncertainty," American Economic Review, American Economic Association, American Economic Association, vol. 83(1), pages 273-77, March.
  15. Bond, Stephen & Van Reenen, John, 2007. "Microeconometric Models of Investment and Employment," Handbook of Econometrics, Elsevier, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 65 Elsevier.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Mellati, Ali, 2008. "Uncertainty and investment in private sector: An analytical argument and a review of the economy of Iran," MPRA Paper 26655, University Library of Munich, Germany.
  2. Johansson, Fredrik & Klevmarken, Anders, 2006. "Explaining the size and nature of response in a survey on health status and economic standard," Working Paper Series, Uppsala University, Department of Economics 2006:2, Uppsala University, Department of Economics.
  3. Mohn, Klaus & Misund, Bård, 2009. "Investment and uncertainty in the international oil and gas industry," Energy Economics, Elsevier, Elsevier, vol. 31(2), pages 240-248, March.
  4. Berg, Lennart & Berger, Tommy, 2005. "The Q theory and the Swedish housing market –an empirical test," Working Paper Series, Uppsala University, Department of Economics 2005:19, Uppsala University, Department of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bla:obuest:v:69:y:2007:i:5:p:603-617. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.