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Why is Micro Evidenceon the Effects of Uncertainty Not Replicated in Macro Data?
Author:
Domenico Lombardinull

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Stephen Bondnull

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Series:
IMF Working Papers
Volume/Issue:
Volume 2005: Issue 158
Language:
English
Publication Date:
01 Aug 2005
DOI:
https://doi.org/10.5089/9781451861778.001
ISBN:
9781451861778
ISSN:
1018-5941
Pages:
36
Keywords:
WP; time series; Aggregation; Investment; Uncertainty; investment equation; investment dynamics; error correction term; investment decision; investment data; Manufacturing; Stocks; Time series analysis; Production growth; Bonds; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This study investigates the relationship between uncertainty and investment using U.K. data at different levels of aggregation. Motivated by a comparative econometric analysis using a firm-level panel and aggregate time-series data, we analyze the implications of aggregating nonlinear microeconomic processes. Replicating firm-level evidence that uncertainty influences investment dynamics proves to be challenging. Even using perfectly consistent data sources, this requires both exact aggregation of the underlying micro equations, and controlling for the unobserved influences on investment that are commonly subsumed into time dummies in panel studies. These conditions are unlikely to be satisfied in most aggregate econometric studies.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2005: Issue 158