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Is the investment-uncertainty relationship non-linear? : an emperical [i.e. empirical] analysis for the Netherlands

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Author Info

  • Bo, H.
  • Lensink, R.

    (Groningen University)

Abstract

We examine the investment-uncertainty relationship for a panel of Dutch manufacturing firms. The system generalised method of moments (GMM) estimates suggests that the effect of uncertainty on investment is non-linear: for low levels of uncertainty an increase in uncertainty has a positive effect on investment, whereas for high levels of uncertainty an increase in uncertainty lowers investment. This result is in line with a number of theoretical studies, but has never been demonstrated empirically.

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File URL: http://irs.ub.rug.nl/ppn/240961293
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Bibliographic Info

Paper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 00E44.

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Date of creation: 2000
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Handle: RePEc:dgr:rugsom:00e44

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  9. Xiaoqiang Hu & Fabio Schiantarelli, 1998. "Investment And Capital Market Imperfections: A Switching Regression Approach Using U.S. Firm Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 466-479, August.
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  18. Zeira, Joseph, 1990. "Cost uncertainty and the rate of investment," Journal of Economic Dynamics and Control, Elsevier, vol. 14(1), pages 53-63, February.
  19. Aizenman, Joshua & Marion, Nancy, 1999. "Volatility and Investment: Interpreting Evidence from Developing Countries," Economica, London School of Economics and Political Science, vol. 66(262), pages 157-79, May.
  20. Ellis, Randall P, 1989. "Employee Choice of Health Insurance," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 215-23, May.
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  22. Sarkar, Sudipto, 2000. "On the investment-uncertainty relationship in a real options model," Journal of Economic Dynamics and Control, Elsevier, vol. 24(2), pages 219-225, February.
  23. Marquis, M Susan & Holmer, Martin R, 1996. "Alternative Models of Choice under Uncertainty and Demand for Health Insurance," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 421-27, August.
  24. Simon Price, . "Aggregate uncertainty, investment and asymmetric adjustment in the UK manufacturing sector," Economics Discussion Papers 441, University of Essex, Department of Economics.
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Cited by:
  1. 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.

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