Is the Investment-Uncertainty Relationship Nonlinear? An Empirical Analysis for the Netherlands

Bo, Hong; Lensin, Robert

Abstract

We examine the investment–uncertainty relationship for a panel of Dutch non-financial firms. The system generalized method of moments (GMM) estimates suggest that the effect of uncertainty on investment is nonlinear: for low levels of uncertainty an increase in uncertainty has a positive effect on investment, while 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 documented empirically.

Citation

Bo, H., & Lensin, R. (2005). Is the Investment-Uncertainty Relationship Nonlinear? An Empirical Analysis for the Netherlands. Economica, 72(286), 307-331. https://doi.org/10.1111/j.0013-0427.2005.00416.x

• Journal Article Type: Article
• Publication Date: May 1, 2005
• Deposit Date: Jul 1, 2008
• Journal: Economica
• Print ISSN: 0013-0427
• Electronic ISSN: 1468-0335
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 72
• Issue: 286
• Pages: 307-331
• DOI: https://doi.org/10.1111/j.0013-0427.2005.00416.x