Political referenda and investment: Evidence from Scotland

Arbeitspapier

We present evidence that referenda have a significant, detrimental outcome on investment. Employing an unsupervised machine learning algorithm over the period 2008-2017, we construct three important uncertainty indices underlying reports in the Scottish news media: Scottish independence (IndyRef)-related uncertainty; Brexit-related uncertainty; and Scottish policy-related uncertainty. Examining the relationship of these indices with investment on a longitudinal panel of 3,589 Scottish firms, the evidence suggests that Brexit-related uncertainty associates more strongly than IndyRef -related uncertainty to investment. Our preferred specification suggests that a one standarddeviation increase in Brexit uncertainty foreshadows a reduction in investment by 8% on average in the following year. Besides we find that the uncertainty associated with the Scottish referendum for independence while negligible at the aggregate level, relates more strongly with the investment of listed firms as well as those operating on the border with England. In addition, we present evidence of greater sensitivity to these indices among firms that are financially constrained or whose investment is to a greater degree irreversible.

Angaben zum Objekt

• ISBN: 978-92-899-4046-7
• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: ECB Working Paper ; No. 2403

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Data Collection and Data Estimation Methodology; Computer Programs: General ; Information, Knowledge, and Uncertainty: General ; Investment; Capital; Intangible Capital; Capacity ; General Outlook and Conditions ; General Financial Markets: Government Policy and Regulation ; Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
• Thema: Political uncertainty ; investment ; machine learning ; textual-data

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Azqueta-Gavaldon, Andres
• Ereignis: Veröffentlichung
• (wer): European Central Bank (ECB)
• (wo): Frankfurt a. M.
• (wann): 2020

Weitere Informationen

• DOI: doi:10.2866/961370
• Handle: http://hdl.handle.net/10419/229017
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ