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Does uncertainty affect economic growth? : an empirical analysis

  • Lensink, Robert
  • Bo, Hong
  • Sterken, Elmer

    (Groningen University)

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://irs.ub.rug.nl/ppn/241005248
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Paper provided by University of Groningen, CCSO Centre for Economic Research in its series CCSO Working Papers with number 199902.

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Date of creation: 1999
Date of revision:
Handle: RePEc:dgr:rugccs:199902
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Web page: http://ccso.eldoc.ub.rug.nl/
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  1. Abel, Andrew B, 1983. "Optimal Investment under Uncertainty," American Economic Review, American Economic Association, vol. 73(1), pages 228-33, March.
  2. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
  3. Ghosal, Vivek, 1995. "Input Choices under Price Uncertainty," Economic Inquiry, Western Economic Association International, vol. 33(1), pages 142-58, January.
  4. Xavier Sala-i-Martin, 1997. "I just ran four million regressions," Economics Working Papers 201, Department of Economics and Business, Universitat Pompeu Fabra.
  5. Vivek Ghosal & Prakash Loungani, 2000. "The Differential Impact of Uncertainty on Investment in Small and Large Businesses," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 338-343, May.
  6. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
  7. Ben S. Bernanke, 1980. "Irreversibility, Uncertainty, and Cyclical Investment," NBER Working Papers 0502, National Bureau of Economic Research, Inc.
  8. Andrew B. Abel & Janice C. Eberly, . "A Unified Model of Investment Under Uncertainty," Rodney L. White Center for Financial Research Working Papers 14-93, Wharton School Rodney L. White Center for Financial Research.
  9. Aizenman, Joshua & Marion, Nancy P. & Marion, Nancy P., 1993. "Macroeconomic uncertainty and private investment," Economics Letters, Elsevier, vol. 41(2), pages 207-210.
  10. Aymo Brunetti & Beatrice Weder, 1998. "Investment and institutional uncertainty: A comparative study of different uncertainty measures," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 134(3), pages 513-533, September.
  11. 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.
  12. Lucas, Robert E, Jr & Prescott, Edward C, 1971. "Investment Under Uncertainty," Econometrica, Econometric Society, vol. 39(5), pages 659-81, September.
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