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Corporate Investment and Uncertainty: An empirical analysis

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Author Info
SHINADA Naoki

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Abstract

A great deal of the relevant literature mentions that one of the reasons for the 1990s recession in Japan is increasing "uncertainty." To clarify the effect of uncertainty, this study demonstrates the relationship between uncertainty of productivity growth and investment using Japanese firm-level panel data from FY1986-FY2004. It is found that increasing uncertainty of firm-level productivity growth has a negative effect on investment, and especially higher uncertainty in the shifting of a technological frontier has had a larger impact on investment since the mid-1990s. It is also found that such a negative effect is weakened in industries with higher expected growth of demand.

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Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 08033.

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Length: 28 pages
Date of creation: Aug 2008
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Handle: RePEc:eti:dpaper:08033

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