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

Ciaran Driver and Katsushi Imai

Applied Economics Letters, 2011, vol. 18, issue 4, 305-310

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.

Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:18:y:2011:i:4:p:305-310

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DOI: 10.1080/13504851003670585

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