Why is Micro Evidenceon the Effects of Uncertainty Not Replicated in Macro Data?
August 1, 2005
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Summary
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.
Subject: Bonds, Econometric analysis, Economic sectors, Financial institutions, Manufacturing, Production, Production growth, Stocks, Time series analysis
Keywords: Aggregation, Bonds, error correction term, Global, Investment, investment data, investment decision, investment dynamics, investment equation, Manufacturing, Production growth, Stocks, time series, Time series analysis, Uncertainty, WP
Pages:
36
Volume:
2005
DOI:
Issue:
158
Series:
Working Paper No. 2005/158
Stock No:
WPIEA2005158
ISBN:
9781451861778
ISSN:
1018-5941
