Is the Investment-Uncertainty Relationship Nonlinear? An Empirical Analysis for the Netherlands
We examine the investment-uncertainty relationship for a panel of Dutch non-financial firms. The system generalized method of moments (GMM) estimates suggest that the effect of uncertainty on investment is nonlinear: for low levels of uncertainty an increase in uncertainty has a positive effect on investment, while 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 documented empirically. Copyright (c) The London School of Economics and Political Science 2005.
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Volume (Year): 72 (2005)
Issue (Month): 286 (05)
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