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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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  2. Guiso, L. & Parigi, G., 1996. "Investment and Demand Uncertainty," Papers 289, Banca Italia - Servizio di Studi.
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Cited by:
  1. 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).
  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. 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.

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