This paper investigates empirically the influence of uncertainty on corporate investment. Uncertainty of demand, output prices and investment prices are measured by the standard deviation of (pre-)filtered Belgian (1984-1992) and Spanish (1983-1993) panel data, and included as explanatory variables in the investment equations derived from a neo-classical model with financial constraints. GMM-results indicate that investment behaviour towards output price uncertainty differs significantly in conjecture with a firm’s size and leverage.
