Firms' investment decisions in response to demand and price uncertainty

Abstract: We investigate the effect of demand and price uncertainty on firms' planned and realized investment from a panel of manufacturing firms. Uncertainty measures are derived from firms' own expectations about demand and prices and firm's sales. We find that demand uncertainty at the time of planning depresses planned and subsequent realized investment. Firms do not revise their plans due to demand uncertainty at the time of spending, suggesting that reducing demand uncertainty will only have lagged effects on investment. We do not find any effect of price uncertainty. Our results are consistent with the behavior of monopolistic firms with irreversible capital

Object Details

• Location: Deutsche Nationalbibliothek Frankfurt am Main
• Extent: Online-Ressource
• Language: Englisch
• Notes: Postprint ; begutachtet (peer reviewed) ; In: Applied Economics ; 40 (2008) 18 ; 2337-2351

Classification and Topics

• Classification: Wirtschaft

Contributors, Places and Time

• Event: Veröffentlichung
• (where): Mannheim
• (when): 2008
• Creator: Vermeulen, Philip ; Fuss, Catherine Isabelle

Further information

• DOI: 10.1080/00036840600959909
• URN: urn:nbn:de:0168-ssoar-240571
• Rights: Open Access unbekannt; Open Access; Der Zugriff auf das Objekt ist unbeschränkt möglich.
• Last update: 25.03.2025, 1:50 PM CET