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Is the investment-uncertainty relationship non-linear? : an emperical [i.e. empirical] analysis for the Netherlands

  • Bo, H.
  • Lensink, R.

    (Groningen University)

We examine the investment-uncertainty relationship for a panel of Dutch manufacturing firms. The system generalised method of moments (GMM) estimates suggests that the effect of uncertainty on investment is non-linear: for low levels of uncertainty an increase in uncertainty has a positive effect on investment, whereas 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 demonstrated empirically.

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File URL: http://irs.ub.rug.nl/ppn/240961293
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Paper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 00E44.

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Date of creation: 2000
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Handle: RePEc:dgr:rugsom:00e44
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  8. French, Mark W & Sichel, Daniel E, 1993. "Cyclical Patterns in the Variance of Economic Activity," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(1), pages 113-19, January.
  9. 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.
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  11. R. Glenn Hubbard, 1990. "Asymmetric Information, Corporate Finance, and Investment," NBER Books, National Bureau of Economic Research, Inc, number glen90-1, May.
  12. Ferderer, J Peter, 1993. "The Impact of Uncertainty on Aggregate Investment Spending: An Empirical Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(1), pages 30-48, February.
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  17. Carruth, Alan & Dickerson, Andrew & Henley, Andrew, 2000. " What Do We Know about Investment under Uncertainty?," Journal of Economic Surveys, Wiley Blackwell, vol. 14(2), pages 119-53, April.
  18. Gul, Faruk, 1991. "A Theory of Disappointment Aversion," Econometrica, Econometric Society, vol. 59(3), pages 667-86, May.
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