Is the uncertainty-investment link non-linear? Empirical evidence for developed economies

R Lensink*

*Corresponding author for this work

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10 Citations (Scopus)

Abstract

Is the Uncertainty-Investment Link Non-linear? Empirical Evidence for Developed Economies. - This paper examines whether the impact of uncertainty on aggregate investment differs for low and high values of uncertainty. I present two types of estimates on the impact of uncertainty, measured by the volatility of stock market returns, for a group of developed economies. First, I estimate investment models in which I include a linear and a quadratic term for uncertainty. Second, I estimate investment models in which uncertainty is a threshold variable. Both types of estimates provide evidence on the empirical relevance of a non-linear effect of uncertainty on investment.

Original languageEnglish
Pages (from-to)131-147
Number of pages17
JournalWeltwirtschaftliches Archiv=Review of world economics
Volume138
Issue number1
Publication statusPublished - 2002

Keywords

  • AGGREGATE INVESTMENT
  • IRREVERSIBILITY
  • VOLATILITY
  • COUNTRIES
  • GROWTH

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