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

Peeters, Marga, Does Demand and Price Uncertainty Affect Belgian and Spanish Corporate Investment? (May 29, 2001). Recherches Economiques de Louvain, Vol. 67, No. 3, pp 235-255, 2001, Available at SSRN: https://ssrn.com/abstract=1855171

Marga Peeters (Contact Author)

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

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