The asymmetric impact of economic policy uncertainty on firm-level investment in South Africa: Firm-level evidence from administrative tax data

Abstract

This paper uses firm-level data and a news-based measure of economic policy uncertainty to provide empirical evidence that economic policy uncertainty has a negative impact on firm-level investment in South Africa. Firms’ investment decisions in response to uncertainty reflect firms’ heterogeneity. Medium-sized firms and, to a different extent, small firms reduce their investment by much more than large firms in response to increased policy uncertainty. The relationship between firms categorized by size and the degree of financial constraints they face implies that financially constrained firms are more sensitive to uncertainty than large, unconstrained firms.

Asymmetric Effects of Economic Policy Uncertainty on Food Security in Nigeria

“…Frieden and Hawkins (2010) presented an expression of the economic concept of asymmetric information with which it is possible to derive the dynamical laws of an economy. Lesame (2021) provided empirical evidence on the asymmetric impact of economic policy uncertainty on firm-level investment in South Africa. He concluded that firms' investment decisions in response to uncertainty reflect firms' heterogeneity.…”