Uncertainty, instability, and irreversible investment : theory, evidence, and lessons for Africa

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Uncertainty, instability, and irreversible investment : theory, evidence, and lessons for Africa, Volume 1

Author:	Serven, Luis;	Collection Title:	Policy, Research working papers ; no. WPS 1722
Country:	Africa;	Date Stored:	2001/04/21
Document Date:	1997/02/28	Document Type:	Policy Research Working Paper
Language:	English	Major Sector:	(Historic)Economic Policy
Region:	Africa	Report Number:	WPS1722
Sub Sectors:	Other Economic Policy	SubTopics:	Environmental Economics & Policies; International Terrorism & Counterterrorism; Economic Theory & Research; Trade and Regional Integration; Fiscal & Monetary Policy; Decentralization; ICT Policy and Strategies
Volume No:	1

Summary: A recent (but rapidly growing) literature has focused on how uncertainty and instability affect the adoption of fixed investment projects. That literature shows that if fixed investment projects are costly or impossible to reverse, uncertainty can become a powerful deterrent to investment. The author reviews the literature on irreversible investment to identify the implications for macroeconomic policy and to gauge the practical importance, especially for sub-Saharan Africa, of the link between uncertainty and investment. He presents empirical evidence on the negative association between investment performance and measures of instability, using cross-section time-series data. That evidence suggests that instability and uncertainty are important factors in Africa's poor investment record over the last two decades.


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	PDF 40 pages	WPS1722	0.14

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