Is the investment-uncertainty relationship non-linear?: an emperical [i.e. empirical] analysis for the Netherlands

H. Bo and Robert Lensink

No 00E44, Research Report from University of Groningen, Research Institute SOM (Systems, Organisations and Management)

Abstract: We examine the investment-uncertainty relationship for a panel of Dutch manufacturing firms. The system generalised method of moments (GMM) estimates suggests that the effect of uncertainty on investment is non-linear: for low levels of uncertainty an increase in uncertainty has a positive effect on investment, whereas for high levels of uncertainty an increase in uncertainty lowers investment. This result is in line with a number of theoretical studies, but has never been demonstrated empirically.

Date: 2000
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