Document Type
Article
Abstract
We investigate the endogenous relationship between firm-level investments and macro-level uncertainty for U.S publicly listed firms from 1996 Q1 to 2019 Q4. Based on the Vector AutoRegressive analysis, we learn that underinvestment tends to increase news-based Economic Policy Uncertainty (EPU); overinvestment increases macroeconomic uncertainty; and both under- and over-investment lead to increasing financial uncertainty. Furthermore, the information flow explanation is closely linked to a positive relationship between underinvestment and EPU. Meanwhile, the positive relationship between overinvestment and macroeconomic uncertainty is related to the excessive growth speculation explanation. The small (large) firm subsample analysis also reiterates the explanation of the information flow (excessive growth speculation).
Recommended Citation
Juliana, Rita; Ekaputra, Irwan Adi; Husodo, Zaäfri Ananto; and Kim, Sung suk
(2024)
"Endogenous Uncertainty: Does Investment Inefficiency Contributes to Uncertainty?,"
Bulletin of Monetary Economics and Banking: Vol. 27:
No.
2, Article 4.
DOI: https://doi.org/10.59091/2460-9196.2275
Available at:
https://bulletin.bmeb-bi.org/bmeb/vol27/iss2/4
First Page
265
Last Page
298
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License
Country
Indonesia
Affiliation
Universitas Pelita Harapan
