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To Buy or Not to Buy? Uncertainty, Irreversibility and Heterogeneous Investment Dynamics in Italian Company Data, Domenico Lombardi, Stephen Bond

This study tests for the presence of real options effects induced by uncertainty and (partial) irreversibility on fixed capital investment using Italian company data. The approach recognizes that firm-level investment spending may, itself, be aggregated over multiple investment decisions in separate types of capital goods and emphasizes effects of uncertainty on short-run investment dynamics. Using a survey-based measure of uncertainty related to the assessment of managers responsible for the firms' investment plans, the study finds evidence of heterogeneous and nonlinear dynamics pointing to a slower adjustment of investment in response to demand shocks at higher levels of uncertainty. The results also point to an additional source of nonlinearity originating from a convex response of investment to demand shocks
Table Of Contents
""Contents""; ""I. Introduction""; ""II. A Review of the Literature""; ""III. Econometric Specifications of Investment Behavior""; ""IV. Data Description""; ""V. Measuring Uncertainty""; ""VI. Econometric Analysis""; ""VII. Conclusion""; ""Appendix""; ""A . Survey of In vestment in Manufacturing (SIM)""; ""B . Company Accounts Data Service (CADS)""; ""C . Estimation of Capital Stocks""; ""D . Cash Flow""; ""E . Disposals""; ""F . In vestment""; ""G . Output""
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (29 p.)
Specific Material Designation
Form Of Item

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