EconPapers    
Economics at your fingertips  
 

Investment and Demand Uncertainty

Luigi Guiso and Giuseppe Parigi

The Quarterly Journal of Economics, 1999, vol. 114, issue 1, 185-227

Abstract: This paper investigates the effects of uncertainty on the investment decisions of a sample of Italian manufacturing firms, using information on the subjective probability distribution of future demand for firms' products according to the entrepreneurs. The results support the view that uncertainty weakens the response of investment to demand thus slowing down capital accumulation. Consistent with the predictions of the theory, there is considerable heterogeneity in the effect of uncertainty on investment: it is stronger for firms that cannot easily reverse investment decisions and for those with substantial market power. We show that the negative effect of uncertainty on investment cannot be explained by uncertainty proxying for liquidity constraints.

Date: 1999
References: Add references at CitEc
Citations: View citations in EconPapers (430)

Downloads: (external link)
http://hdl.handle.net/10.1162/003355399555981 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Investment and Demand Uncertainty (1996) Downloads
Working Paper: Investment and Demand Uncertainty (1996)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:qjecon:v:114:y:1999:i:1:p:185-227.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Quarterly Journal of Economics is currently edited by Robert J. Barro, Lawrence F. Katz, Nathan Nunn, Andrei Shleifer and Stefanie Stantcheva

More articles in The Quarterly Journal of Economics from President and Fellows of Harvard College
Bibliographic data for series maintained by Oxford University Press ().

 
Page updated 2025-01-25
Handle: RePEc:oup:qjecon:v:114:y:1999:i:1:p:185-227.