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The effect of uncertainty on UK investment authorisation: Homogeneous vs. heterogeneous estimators

Driver, C, Imai, K, Temple, P and Urga, G (2004) The effect of uncertainty on UK investment authorisation: Homogeneous vs. heterogeneous estimators Empirical Economics, 29 (1). pp. 115-128.

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Abstract

This paper compares pooled and non-pooled models of UK capital investment using the Confederation of British Industry's (CBI) Industrial Trends Survey, focusing on the impact of uncertainty. The uncertainty measure is based on the cross sectional dispersion of optimism about the future business conditions in the industry in which the firm operates. The panel data estimation shows that uncertainty has quantitatively important negative effects on investment. However, if we look at the estimation results at the industry level, we find a great diversity in both estimated elasticities and t-statistics, providing valuable information not available from the pooled model. Finally, we compare the forecast performances of the above models; this analysis confirms that pooled estimators are generally better than non-pooled estimators in terms of out-of-sample forecast performance, but the difference between the two is not very large.

Item Type: Article
Authors :
NameEmailORCID
Driver, CUNSPECIFIEDUNSPECIFIED
Imai, KUNSPECIFIEDUNSPECIFIED
Temple, Pp.temple@surrey.ac.ukUNSPECIFIED
Urga, GUNSPECIFIEDUNSPECIFIED
Date : 1 January 2004
Identification Number : https://doi.org/10.1007/s00181-003-0192-2
Depositing User : Symplectic Elements
Date Deposited : 16 May 2017 14:53
Last Modified : 17 May 2017 14:28
URI: http://epubs.surrey.ac.uk/id/eprint/815544

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