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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. Ángel Estrada & Javier Vallés, 1995. "Investment and Financial Costs: Spanish Evidence with Panel Data," Banco de Espa�a Working Papers 9506, Banco de Espa�a.
  2. 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 517, Board of Governors of the Federal Reserve System (U.S.).
  3. Barran, Fernando & Peeters, Marga, 1998. "Internal finance and corporate investment: Belgian evidence with panel data," MPRA Paper 28504, University Library of Munich, Germany.
  4. Pindyck, Robert S. & Solimano, Andrés., 1993. "Economic instability and aggregate investment," Working papers 3552-93., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  5. 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, vol. 58(2), pages 277-97, April.
  6. Alonso-Borrego, C., 1994. "Estimating Dynamic Investment Models with Financial Constraints," Papers 9418, Centro de Estudios Monetarios Y Financieros-.
  7. Ángel Estrada & Javier Vallés, 1995. "Investment and Financial Costs: Spanish Evidence with Panel Data," Banco de Espa�a Working Papers 9506, Banco de Espa�a.
  8. Leahy, John V & Whited, Toni M, 1996. "The Effect of Uncertainty on Investment: Some Stylized Facts," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(1), pages 64-83, February.
  9. Andrew B. Abel & Janice B. Eberly, . "The Effects of Irreversibility and Uncertainty on Capital Accumulation," Rodney L. White Center for Financial Research Working Papers 21-95, Wharton School Rodney L. White Center for Financial Research.
  10. James Banks & Richard Blundell & Agar Brugiavini, 1995. "Income uncertainty and consumption growth in the UK," IFS Working Papers W95/13, Institute for Fiscal Studies.
  11. Hartman, Richard, 1972. "The effects of price and cost uncertainty on investment," Journal of Economic Theory, Elsevier, vol. 5(2), pages 258-266, October.
  12. Whited, Toni M., 1994. "Problems with identifying adjustment costs from regressions of investment on q," Economics Letters, Elsevier, vol. 46(4), pages 327-332, December.
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Citations

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Cited by:
  1. Lensink, R. & Sterken, Elmer, 1999. "Capital market imperfections, uncertainty and corporate investment in the Czech Republic," Research Report 99E51, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  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 06-060/3, Tinbergen Institute.
  3. Ansgar Belke & Ralph Setzer, 2003. "Exchange Rate Variability and Labor Market Performance in the Visegrád Countries," Economic Change and Restructuring, Springer, vol. 36(2), pages 153-175, June.
  4. Lensink, Robert & Bo, Hong & Sterken, Elmer, 1999. "Does uncertainty affect economic growth? : an empirical analysis," Research Report 99E23, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  5. Lensink, Robert & Steen, Paul van & Sterken, Elmer, 2000. "Is size important for the investment-uncertainty relationship? : an empirical analyses for Dutch firms," Research Report 00E03, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  6. Ansgar Belke, 2002. "EU Enlargement, Exchange Rate Variability and Labor Market Performance," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 213/2002, Department of Economics, University of Hohenheim, Germany.
  7. 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.
  8. von Kalckreuth, Ulf, 2000. "Exploring the role of uncertainty for corporate investment decisions in Germany," Discussion Paper Series 1: Economic Studies 2000,05, Deutsche Bundesbank, Research Centre.
  9. 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.
  10. Robert Lensink & Paul Steen & Elmer Sterken, 2005. "Uncertainty and Growth of the Firm," Small Business Economics, Springer, vol. 24(4), pages 381-391, 05.

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