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Exploring the role of uncertainty for corporate investment decisions in Germany

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  • Ulf von Kalckreuth

Abstract

This paper studies the impact of sales uncertainty on firms' investment outlays using the database of the Deutsche Bundesbank's corporate balance sheet statistics. The sample used for estimation is a panel of 4'234 west German manufacturing firms with 33'217 observations, covering the years 1987-1997. In 1996, these firms accounted for 49.3% of the total turnover of German incorporated manufacturers. As uncertainty indicators, we construct firm-specific, time varying volatility measures. Using Within estimators and GMM techniques, we find a moderately strong and consistently negative effect of uncertainty on investment. If the uncertainty indicator is increased by one standard deviation, the predicted investment demand will fall by about 3.7 % of its mean.

Suggested Citation

  • Ulf von Kalckreuth, 2003. "Exploring the role of uncertainty for corporate investment decisions in Germany," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 139(II), pages 173-206, June.
    • Handle: RePEc:ses:arsjes:2003-ii-3
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    More about this item

    Keywords

    Investment; Uncertainty; Panel Estimation;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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