IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpga/0012006.html
   My bibliography  Save this paper

Policy Uncertainty and Long-Run Investment and Output across Countries

Author

Listed:
  • Byeongju Jeong

    (CERGE-EI)

Abstract

I explore how and and to what extent policy uncertainty can account for the observed long-run cross-country differences in capital price and levels of aggregate investment and output. I present a model economy where the industry-level policy-related investment cost is uncertain. Holding the average one-period investment cost constant, policy uncertainty leads to a higher capital price and subsequently to lower levels of long-run aggregate investment and output. Policy uncertainty also makes industry-level investment more volatile. In an investigation of industry-level investment across countries, I find that, consistent with the model, industry-level investment in lower-income countries is more volatile. I calibrate the model so that the simulated investment sequences from the model mimic the actual investment sequences. I find that policy uncertainty can account for large differences in long-run capital price, investment, and output across countries. Between the lowest-income and the highest-income countries, policy uncertainty can account for the capital price difference by a factor of about three, and can account for investment and output level differences of a similar magnitude.

Suggested Citation

  • Byeongju Jeong, 2001. "Policy Uncertainty and Long-Run Investment and Output across Countries," Game Theory and Information 0012006, EconWPA.
  • Handle: RePEc:wpa:wuwpga:0012006
    Note: Type of Document - Acrobat PDF; pages: 39 ; figures: included
    as

    Download full text from publisher

    File URL: http://econwpa.repec.org/eps/game/papers/0012/0012006.pdf
    Download Restriction: no

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Vatcharin Sirimaneetham, 2006. "Explaining policy volatility in developing countries," Bristol Economics Discussion Papers 06/583, Department of Economics, University of Bristol, UK.
    2. Vi Dung Ngo & Frank Janssen & Marine Falize, 2016. "An incentive-based model of international entrepreneurship in emerging and transition economies," Journal of International Entrepreneurship, Springer, vol. 14(1), pages 52-74, March.
    3. Mellati, Ali, 2008. "Uncertainty and investment in private sector: An analytical argument and a review of the economy of Iran," MPRA Paper 26655, University Library of Munich, Germany.
    4. Ngo, Vi Dung & Janssen, Frank & Leonidou, Leonidas C. & Christodoulides, Paul, 2016. "Domestic institutional attributes as drivers of export performance in an emerging and transition economy," Journal of Business Research, Elsevier, vol. 69(8), pages 2911-2922.
    5. Malik, Adeel & Temple, Jonathan R.W., 2009. "The geography of output volatility," Journal of Development Economics, Elsevier, vol. 90(2), pages 163-178, November.
    6. Malik, Adeel & Temple, Jonathan R.W., 2009. "The geography of output volatility," Journal of Development Economics, Elsevier, vol. 90(2), pages 163-178, November.

    More about this item

    Keywords

    Policy uncertainty; Capital price; Investment; Output; Cross- countrycomparison;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpga:0012006. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA). General contact details of provider: http://econwpa.repec.org .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.