Investment and Uncertainty in Machinery and Real Estate

Rodrigo Mendes Pereira

Revista Brasileira de Economia - RBE, 2008, vol. 62, issue 3

Abstract: Investment is usually treated as an homogeneous variable in the literature. The wide differences in the nature of inputs used in investment projects may lead to interesting insights that are not captured in the conventional approach. In this paper I decompose investment in machinery and industrial real estate and examine the impact of economic uncertainty on each of these components. Using panel data estimation methods for the Brazilian industry, I found that uncertainty exerts a harmful effect on both types of investment. However, the effect is much more intense with machines, which possibly is a consequence of their high reversibility costs.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:fgv:epgrbe:v:62:y:2008:i:3:a:1122

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