The Effect of Uncertainty on Investment: Some Stylized Facts
AbstractThe theoretical relationship between investment and uncertainty is ambiguous. This paper briefly surveys the insights that theory has to offer and then runs a series of simple tests aimed at evaluating the empirical significance of various theoretical effects. Our results from a panel of U.S. manufacturing firms indicate a negative effect of uncertainty on investment consistent with theories of irreversible investment. We find no evidence for a positive effect via the channel of the convexity of the marginal product of capital, and we find no evidence for the presence of a CAPM-based effect of risk.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4986.
Date of creation: Jan 1995
Date of revision:
Publication status: published as Journal of Money Credit and Banking, Vol. 28, no. 1, (February 1996), pp. 64-83.
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Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
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Other versions of this item:
- 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.
- E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
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