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The Influence of Uncertainty on Investment in the UK: A Macro or Micro Phenomenon?

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  • Temple, Paul
  • Urga, Giovanni
  • Driver, Ciaran

Abstract

While the theory examining the relationship between uncertainty and investment has suggested new research avenues, it has not had strong predictive power. Nevertheless, at the policy level the benefits for investment of a more stable economic climate are being emphasised. These considerations point to the need for empirical work. Accordingly, this paper draws on industry level panel data, obtained by marrying the UK Census of Production with the CBI Industrial Trends Survey, and applies dynamic panel data methods to distinguish between macro and micro sources of uncertainty and to consider the role of financial factors. It is found that both sources of uncertainty exert a considerable negative impact on investment, while financial factors may be important in some industries. Copyright 2001 by Scottish Economic Society.

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Bibliographic Info

Article provided by Scottish Economic Society in its journal Scottish Journal of Political Economy.

Volume (Year): 48 (2001)
Issue (Month): 4 (September)
Pages: 361-82

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Handle: RePEc:bla:scotjp:v:48:y:2001:i:4:p:361-82

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Cited by:
  1. Joseph P. Byrne & E. Philip Davis, 2005. "Investment and Uncertainty in the G7," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 141(1), pages 1-32, April.
  2. Driver, Ciaran & Guedes, Maria João Coelho, 2012. "Research and development, cash flow, agency and governance: UK large companies," Research Policy, Elsevier, Elsevier, vol. 41(9), pages 1565-1577.
  3. 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.
  4. Mark J. Koetse & Henri L.F. de Groot & Raymond J.G.M. Florax, 2006. "The Impact of Uncertainty on Investment: A Meta-Analysis," Tinbergen Institute Discussion Papers 06-060/3, Tinbergen Institute.
  5. Robert S. Chirinko & Huntley Schaller, 2008. "The Irreversibility Premium," CESifo Working Paper Series 2265, CESifo Group Munich.
  6. Kang, Wensheng & Lee, Kiseok & Ratti, Ronald A., 2013. "Economic Policy Uncertainty and Firm-Level Investment," MPRA Paper 51277, University Library of Munich, Germany.
  7. Mitchell, James & Mouratidis, Kostas & Weale, Martin, 2007. "Uncertainty in UK manufacturing: Evidence from qualitative survey data," Economics Letters, Elsevier, Elsevier, vol. 94(2), pages 245-252, February.

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