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Discovering the Link Between Uncertainty and Investment - Microeconometric Evidence from Germany

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  • Hjalmar Boehm

    (Universitaet Hamburg)

  • Michael Funke

    (Universitaet Hamburg)

  • Nikolaus A. Siegfried

    (Universitaet Hamburg)

Abstract

We analyse empirically the effect of uncertainty on the investment decisions of a sample of quoted German firms. The uncertainty measures are constructed by employing two procedures: the conventional formula of standard deviation, and the GARCH methodology. We find that uncertainty exerts a significantly negative effect on investment, i.e. uncertainty slows down capital accumulation. We also find that this negative relationship is closely related to the degree of market power of the firm.

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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 0112.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:0112

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  1. Ghosal, Vivek & Loungani, Prakash, 1996. "Product Market Competition and the Impact of Price Uncertainty on Investment: Some Evidence from US Manufacturing Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 44(2), pages 217-28, June.
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Cited by:
  1. Silke Hüttel & Oliver Mußhoff & Martin Odening & Nataliya Zinych, 2008. "Estimating Investment Equations in Imperfect Capital Markets," SFB 649 Discussion Papers SFB649DP2008-016, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  2. 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.
  3. Wohlers, Eckhardt & Größl, Ingrid & Stahlecker, Peter, 1999. "Finanzierungsstruktur und Risiken im Unternehmenssektor der Bundesrepublik Deutschland : eine empirische Bestandsaufnahme," HWWA Discussion Papers 83, Hamburg Institute of International Economics (HWWA).

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