Format:
31 S
,
graph. Darst
,
b
ISBN:
393374752X
Series Statement:
Discussion paper / Economic Research Group of the Deutsche Bundesbank 5/00
Content:
The impact of uncertainty on firms' investment outlays is subject to an ongoing debate. Theory identifies several channels. Irreversibility, financing constraints and risk aversion make a negative relationship between uncertainty and investment likely. On the other hand, the ability of firms to adapt after uncertainty is resolved can make a risky strategy more attractive. Therefore, risk may also constitute an incentive to invest. The net effect is theoretically indeterminate. The empirical literature has not yet been able to settle the question. This paper studies the impact of uncertainty on firm's investment outlays using the database of the Deutsche Bundesbank's corporate balance sheet statistics. Our database represents roughly 75% of the total turnover of the west German manufacturing sector. The sample used for estimation contains 6,745 firms with almost 50,000 observations, covering the years 1987 - 1997. This is a period long enough to generate measures of uncertainty specific to both firm and time. Using panel econometric methods, we estimate the effect of sales uncertainty and cost uncertainty on investment demand. We obtain two key results. First, there is a moderately strong and consistently negative effect of uncertainty on investment. If both uncertainty indicators are increased by one standard deviation, the estimated investment demand will fall by 6ư% of its mean. Furthermore, it emerges that sales uncertainty and cost uncertainty are of equal importance for investment: both our indicators contribute about 3 percentage points to the total reduction of investment.
Note:
Zsfassung in dt. Sprache. - Literaturverz. S. 24 - 27
Additional Edition:
Erscheint auch als Online-Ausgabe Kalckreuth, Ulf von, 1963 - Exploring the role of uncertainty for corporate investment decisions in Germany Frankfurt am Main : Deutsche Bundesbank, 2000
Language:
English
Subjects:
Economics
Keywords:
Deutschland
;
Unternehmen
;
Investitionsverhalten
;
Entscheidung bei Unsicherheit
;
Panelanalyse
;
Arbeitspapier
;
Graue Literatur
URL:
http://www.bundesbank.de
Author information:
Kalckreuth, Ulf von 1963-
