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Does uncertainty affect economic growth? An empirical analysis

  • Robert Lensink
  • Hong Bo
  • Elmer Sterken

This paper investigates the effect of uncertainty on economic growth. We construct measures of export uncertainty, government policy uncertainty and price uncertainty to augment a growth model, and using econometric techniques we test for robustness of the effects of these measure on economic growth in a cross-section of 138 developing and developed economies during 1970-1995. The result clearly shows a robust and negative effect of uncertainty on economic growth. These results underline the importance of export stability and policy credibility.

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File URL: http://hdl.handle.net/10.1007/BF02707331
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Article provided by Springer in its journal Weltwirtschaftliches Archiv.

Volume (Year): 135 (1999)
Issue (Month): 3 (September)
Pages: 379-396

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Handle: RePEc:spr:weltar:v:135:y:1999:i:3:p:379-396
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  1. John V. Leahy & Toni M. Whited, 1995. "The Effect of Uncertainty on Investment: Some Stylized Facts," NBER Working Papers 4986, National Bureau of Economic Research, Inc.
  2. Martin, Philippe & Rogers, Carol Ann, 1995. "Stabilization Policy, Learning by Doing, and Economic Growth," CEPR Discussion Papers 1130, C.E.P.R. Discussion Papers.
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  17. Bo, Hong & Sterken, Elmer, 2002. "Volatility of the interest rate, debt and firm investment: Dutch evidence," Journal of Corporate Finance, Elsevier, vol. 8(2), pages 179-193, March.
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