Does Demand and Price Uncertainty Affect Belgian and Spanish Corporate Investment?
Recherches Economiques de Louvain, Vol. 67, No. 3, pp 235-255, 2001
22 Pages Posted: 29 May 2011
Date Written: May 29, 2001
Abstract
Several recent studies have shown that uncertainty affects investment decisions. Specifically, demand and/or price uncertainty are found to depress corporate investment in e.g. the United States. This paper investigates whether similar results hold for Belgium and Spain, countries where financial markets are less developed and many firms evidently face financial constraints. Uncertainty of demand, output prices and investment prices are measured by the standard deviation of (pre-)filtered Belgian (1984-1992) and Spanish (1983-1993) panel data, and included as explanatory variables in the investment equations derived from a neo-classical model. The results indicate that investment behaviour towards uncertainty differs significantly between low- and high-leveraged firms in both Belgium and Spain.
Keywords: corporate investmen, uncertainty, neo-classical
JEL Classification: D81, 016
Suggested Citation: Suggested Citation
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