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Testing the uncertainty-investment relationship using survey data on capital stock disequilibrium

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  • Ciaran Driver
  • Katsushi Imai

Abstract

This article uses unique survey-based data that record the extent of positive and negative disequilibrium in capital stock at industry level. Change in these disequilibria are hypothesized to take account of planned and revised targets, and the influence of uncertainty on adjustment. We find that increased uncertainty slows the adjustment of fixed capital towards equilibrium levels. That is consistent with the predictions of real options theory and partial irreversibility models.

Suggested Citation

  • Ciaran Driver & Katsushi Imai, 2011. "Testing the uncertainty-investment relationship using survey data on capital stock disequilibrium," Applied Economics Letters, Taylor & Francis Journals, vol. 18(4), pages 305-310.
    • Handle: RePEc:taf:apeclt:v:18:y:2011:i:4:p:305-310
    DOI: 10.1080/13504851003670585
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    References listed on IDEAS

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