Economic policy uncertainty and firm investment: evidence from the U.S. market

Pei-Fen Chen, Chien-Chiang Lee () and Jhih-Hong Zeng

Applied Economics, 2019, vol. 51, issue 31, 3423-3435

Abstract: This paper examines the impact of economic policy uncertainty on firm-level capital investment, by not only delving into the long-term investment-uncertainty relation like previous studies, but also analyzing the short-term investment-uncertainty relation for the U.S. market. The empirical investigations show that firms decrease short-term, long-term, and total firm investments when encountering higher economic policy uncertainties. The research also explores the non-linear investment-uncertainty relation based on various theories. Our findings present a U-shaped relationship between short-term, long-term, and total investments and uncertainties. Policy implications are provided from our empirical results.

Date: 2019
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DOI: 10.1080/00036846.2019.1581909

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