Degiannakis, S., Filis, G. and Palaidimos, G., 2017. Investments and uncertainty revisited: The case of the US economy. Applied Economics. (In Press)
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This paper examines the relationship between investments and uncertainty for the US economy, as the latter is approximated by consumer sentiment, purchasing managers’ prospects and economic policy uncertainty. Contrary to the existing literature, we provide evidence that this relationship is time-varying. The time variation is attributed to the observed temporal replacement effect between private and public investments. Furthermore, we show that there are two distinct correlation regimes in this relationship and unless we concentrate on them, we cannot fully unravel the real link between uncertainty and investments. Finally, we examine whether the use of the two correlation regimes provides better forecasts for investments compared to the use of the uncertainty indices alone. The forecasting exercise reveals that the use of correlation regimes provides statistically superior out of-sample forecasts.
|Uncontrolled Keywords:||uncertainty; public investments; private investments; gross fixed capital formation; dynamic correlation; forecast|
|Group:||Faculty of Management|
|Deposited By:||Unnamed user with email symplectic@symplectic|
|Deposited On:||17 Jan 2017 11:27|
|Last Modified:||17 Jan 2017 11:27|
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