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Does Demand and Price Uncertainty affect Belgian and Spanish Corporate Investment?

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  • Marga PEETERS

    (Econometric Research and Special Studies Department, De Nederlandsche Bank)

Abstract

This paper investigates erapirically the influence of uncertainty on corporate investment. Uncertainty of demand, output prices and investment prices are measured by the standard deviation of (pre-)filtered Belgian (1984-1992) and Spanish (1983-1993) panel data, and included as explanatory variables in the investment equations derived from a neo-classical model with financial constraints. GMM-results indicate that investment behaviour towards output price uncertainty differs significantly in conjecture with a firm's size and leverage.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (REL - Recherches Economiques de Louvain) with number 2001031.

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Length: 22
Date of creation: 01 Sep 2001
Date of revision:
Handle: RePEc:ctl:louvre:2001031

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Keywords: Investment; uncertainty; financial factors;

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References

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  1. Alonso-Borrego, C., 1994. "Estimating Dynamic Investment Models with Financial Constraints," Papers, Centro de Estudios Monetarios Y Financieros- 9418, Centro de Estudios Monetarios Y Financieros-.
  2. Ángel Estrada & Javier Vallés, 1995. "Investment and Financial Costs: Spanish Evidence with Panel Data," Banco de Espa�a Working Papers, Banco de Espa�a 9506, Banco de Espa�a.
  3. Ángel Estrada & Javier Vallés, 1995. "Investment and Financial Costs: Spanish Evidence with Panel Data," Banco de Espa�a Working Papers, Banco de Espa�a 9506, Banco de Espa�a.
  4. John V. Leahy & Toni M. Whited, 1995. "The Effect of Uncertainty on Investment: Some Stylized Facts," NBER Working Papers 4986, National Bureau of Economic Research, Inc.
  5. Hartman, Richard, 1972. "The effects of price and cost uncertainty on investment," Journal of Economic Theory, Elsevier, Elsevier, vol. 5(2), pages 258-266, October.
  6. Vivek Ghosal & Prakash Loungani, 1995. "Product market competition and the impact of price uncertainty on investment: some evidence from U.S. manufacturing industries," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 517, Board of Governors of the Federal Reserve System (U.S.).
  7. Andrew B. Abel & Janice B. Eberly, . "The Effects of Irreversibility and Uncertainty on Capital Accumulation," Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research 21-95, Wharton School Rodney L. White Center for Financial Research.
  8. Barran, Fernando & Peeters, Marga, 1998. "Internal finance and corporate investment: Belgian evidence with panel data," Economic Modelling, Elsevier, Elsevier, vol. 15(1), pages 67-89, January.
  9. Robert S. Pindyck & Andres Solimano, 1993. "Economic Instability and Aggregate Investment," NBER Working Papers 4380, National Bureau of Economic Research, Inc.
  10. Whited, Toni M., 1994. "Problems with identifying adjustment costs from regressions of investment on q," Economics Letters, Elsevier, Elsevier, vol. 46(4), pages 327-332, December.
  11. James Banks & Richard Blundell & Agar Brugiavini, 1995. "Income uncertainty and consumption growth in the UK," IFS Working Papers, Institute for Fiscal Studies W95/13, 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.
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Citations

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Cited by:
  1. Ansgar Belke, 2002. "EU Enlargement, Exchange Rate Variability and Labor Market Performance," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim, Department of Economics, University of Hohenheim, Germany 213/2002, Department of Economics, University of Hohenheim, Germany.
  2. 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, Tinbergen Institute 06-060/3, Tinbergen Institute.
  3. Lensink, Robert & Bo, Hong & Sterken, Elmer, 1999. "Does uncertainty affect economic growth? : an empirical analysis," CCSO Working Papers, University of Groningen, CCSO Centre for Economic Research 199902, University of Groningen, CCSO Centre for Economic Research.
  4. von Kalckreuth, Ulf, 2000. "Exploring the role of uncertainty for corporate investment decisions in Germany," Discussion Paper Series 1: Economic Studies, Deutsche Bundesbank, Research Centre 2000,05, Deutsche Bundesbank, Research Centre.
  5. 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, Tinbergen Institute 06-060/3, Tinbergen Institute.
  6. Robert Lensink & Paul Steen & Elmer Sterken, 2005. "Uncertainty and Growth of the Firm," Small Business Economics, Springer, Springer, vol. 24(4), pages 381-391, 05.
  7. Lensink, R. & Sterken, Elmer, 1999. "Capital market imperfections, uncertainty and corporate investment in the Czech Republic," Research Report, University of Groningen, Research Institute SOM (Systems, Organisations and Management) 99E51, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  8. Van Els, Peter & Peeters, Marga, 1999. "De baten van een gemeenschappelijke Europese munt
    [The benefits of a common European currency]
    ," MPRA Paper 28714, University Library of Munich, Germany.
  9. Ansgar Belke & Ralph Setzer, 2003. "Exchange Rate Variability and Labor Market Performance in the Visegrád Countries," Economic Change and Restructuring, Springer, Springer, vol. 36(2), pages 153-175, June.
  10. Lensink, Robert & Steen, Paul van & Sterken, Elmer, 2000. "Is size important for the investment-uncertainty relationship? : an empirical analyses for Dutch firms," Research Report, University of Groningen, Research Institute SOM (Systems, Organisations and Management) 00E03, University of Groningen, Research Institute SOM (Systems, Organisations and Management).

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