translated by damien from sildes of Sisi Ramanan

Unit 6b Investment Fixed Costs and Irreversibility

Uncertainty

Frank Knight (1921) defines uncertainty as the agents’ inability to forecast the likelihood of events happening. In other words, the distribution of outcomes is immeasurable (unknown). It is different from Risk because risk only describes a known probability distribution over all possible events. Example: Tossing a coin is risky while the total number of coins produced by mankind is uncertain.
  Frank Knight（1921）将不确定性定义为代理人无法预测事件发生的可能性。换句话说，结果的分布是不可估量的（未知的）。它不同于风险，因为风险只描述了所有可能事件的已知概率分布。抛硬币是有风险的，而人类生产的硬币总数是不确定的。

Uncertainty is not directly observable, which makes it hard to measure. There is no perfect measurement, but a broad range of proxies have been suggested. The volatility of stock market or GDP is often used as a measure of uncertainty because when a data series becomes more volatile it is harder to forecast.
  不确定性是不可直接观察到的，这使得它很难测量。没有完美的衡量标准，但已经提出了广泛的代理。股票市场或GDP的波动性通常被用来衡量不确定性，因为当一个数据序列变得更不稳定时，就更难预测。

Another measure is forecaster disagreement which is the differences in opinion or expectations about how economic variables are going to evolve. High disagreement indicates high uncertainty.
  另一个衡量指标是预测者的分歧，即对经济变量将如何演变的观点或预期存在分歧。高度不一致表示高度不确定性。

Other measures include mentions of “uncertainty” in the news and the dispersion of productivity shocks to firms.
  其他措施包括在新闻中提到“不确定性”以及对企业生产率冲击的分散。

• Macro Uncertainty Rises in Recessions.
    -宏观不确定性在衰退中上升。
• Micro Uncertainty Rises in Recessions.
    -微观不确定性在衰退中上升。
• Wages and Income Volatility are Counter-Cyclical.
    -工资和收入波动是反周期的。
• Uncertainty is higher in developing countries.
    -发展中国家的不确定性更高。

Investment

投资

During periods of high uncertainty, we observe low investment spending. This was the case during the short-lived 2001 recession in U.S. when investment dropped below historical average and stayed at these low levels for several years.
  在高不确定性时期，我们观察到低投资支出。2001年美国短暂的经济衰退时期就是这样，当时的投资降至历史平均水平以下，并在数年内保持在这一低水平。

Early contribution on investment uncertainty literature was by Dixit and Pindyck. They argue that uncertainty creates real options for investment. Firm has option to invest but need not exercise the option now - can wait for more information. Options are many:
  Dixit和Pindyck对投资不确定性文献的早期贡献。他们认为不确定性为投资创造了真正的期权。公司有投资选择权，但现在不需要行使期权-可以等待更多信息。选项很多：

1. Option to delay project
     延迟项目的期权
2. Option to stop before completion
     在完成前停止的期权
3. Option to abandon after completion
     竣工后放弃的期权
4. Option to temporarily stop producing
     在不确定情况下暂时停止生产的期权

Under uncertainty, NPV of waiting/delaying might be higher than NPV of investing now.
  等待/延迟的净现值可能高于现在投资的净现值。

Real options arise only when investment decisions cannot be reversed. If investment is irreversible (sunk cost), there is an opportunity cost of investing now rather than waiting. Opportunity cost (the value of option) can be very large. Higher the uncertainty higher is the value of option.
  只有当投资决策无法逆转时，才会出现实物期权。如果投资是不可逆的（沉没成本），那么现在投资就有机会成本，而不是等待。机会的价值很大。不确定性越高，期权的价值就越高。

Examples of investment involving sunk costs:
  涉及沉没成本的投资实例：

1. Building an oil tanker
     建造油轮
2. Scrapping a tanker
     报废油轮
3. Undertaking an R&D program
     开展研发项目
4. Building a new plant
     建造新工厂

Under option theory of Dixit and Pindyck, investment behaviour becomes cautious. However, the theory cannot be tested on firm level data which does not exhibit the “wait and see” approach. We now turn to a study by Bloom, Bond and Van Reenen (2007). They theoretically model and empirically examine the effects of demand uncertainty on investment allowing for plant and firm level disaggregation.
  在Dixit和Pindyck的期权理论下，投资行为变得谨慎。然而，这一理论不能在没有“观望”方法的企业层面数据上进行检验。我们现在转向Bloom，Bond和Van Reenen（2007）的一项研究。他们从理论上建立模型，并实证检验需求不确定性对投资的影响，考虑到工厂和企业层面的分解。

Question: Can the effects of uncertainty and irreversibility be detected in an econometric study using firm-level data?
  问题：不确定性和不可逆性的影响能否在使用企业级数据的计量经济学研究中被发现？

They build a model incorporating both uncertainty about demand + irreversibility. Irreversibility is modelled as difference in the purchase and resell price of capital. Uncertainty about demand is modelled as a time-varying variance in the process that determines the product price.
  他们建立了一个包含需求不确定性和不可逆性的模型。不可逆性被建模为资本购买和转售价格的差异。需求的不确定性被建模为决定产品价格的过程中的时变方差。

Different specifications of adjustment costs. Allow for aggregation across:
  不同规格的调整费用。允许聚合：

1. different types of complementary capital like structures, equipment and vehicles, and
     不同类型的补充资本，如结构、设备和车辆，以及

2. production units or plants, each firm on average has around 220 plants (based on U.K. data)
     生产单位或工厂，每个公司平均有大约220家工厂（基于英国数据）

Main Result: With irreversibility, the impact effect on investment of a given firm level demand shock tends to be weaker for firms that are subject to a higher level of uncertainty.
  主要结果：在不可逆性下，对于不确定性程度较高的企业而言，给定企业层面需求冲击对投资的影响往往较弱。

Compare model results with real data sample containing 672 publicly traded U.K. manufacturing companies over the period 1972-1991. Find evidence:
  在1972-1991年期间，将模型结果与包含672个公开交易的英国制造公司的真实数据样本进行比较。寻找证据：

1. of more cautious investment behaviour for firms subject to greater uncertainty and
     对于面临更大不确定性和
2. of a convex response of investment to real sales growth.
     投资对实际销售增长的凸响应。

They conclude that investment behaviour of large firms is consistent with a partial irreversibility model in which uncertainty dampens the short run adjustment of investment to demand shocks.
  他们的结论是，大公司的投资行为与部分不可逆性模型一致，其中不确定性抑制了投资对需求冲击的短期调整。

Finally, simulations of their model suggest that observed fluctuations in uncertainty can play an important role shaping firm level investment decisions. For example, a one standard deviation increase in the uncertainty measure, like that which occurred after September 11, 2001 and the 1973 oil crisis can halve the impact effect of demand shocks on company investment.
  最后，对他们模型的模拟表明，观察到的不确定性波动可以在企业层面的投资决策中发挥重要作用。例如，在不确定性度量中增加一个标准差，就像2001年9月11日和1973年石油危机之后发生的那样，可以将需求冲击对公司投资的影响减半。

First implication - the short-run response of investment to demand shocks will be lower at higher levels of uncertainty. The slope of these response function is lower at higher levels of uncertainty.
  第一个含义是，在不确定性较高的情况下，投资对需求冲击的短期反应将较低。在较高的不确定性水平下，这些响应函数的斜率较低。

Comparing investment responses with -10% and +25% demand growth:
  将投资响应与-10%和+25%的需求增长进行比较

1. The gradient of the investment response to demand growth approximately doubles when moving from the third quartile to the first quartile of the distribution of uncertainty.
     当从不确定性分布的第三个四分位数移到第一个四分位数时，投资对需求增长的反应梯度大约加倍。
2. Approximately triples when when moving from the 90th percentile to the 10th percentile.
     当从第90百分位移到第10百分位时，大约是原来的三倍。

In an attempt to capture all relevant factors in one scalar measure, authors follow the approach suggested by Leahy and Whited (1996). They use the standard deviation of stock returns for each firm in every accounting year. Intuitively the variance in a firm’s stock return captures uncertainty about its future demand and / or productivity conditions.
  为了在一个标量测度中捕捉所有相关因子，作者采用了Leahy和Whited（1996）提出的方法。他们使用每个会计年度每个公司股票收益的标准差。直观地说，一家公司股票收益率的差异反映了其未来需求和/或生产率状况的不确定性。

Figure 2 plots the predicted response of investment rates for observations at different levels of uncertainty. Large “cautionary” effect of higher uncertainty on the short-run investment response.
  图2描绘了不同不确定性水平下投资率的预测反应。较大的不确定性对短期投资反应的“警示”效应较大。

Moving from the third quartile to the first quartile in the distribution of the measure of uncertainty doubles the impact, while moving from the 90th percentile to the 10th percentile increases it by fourfold. This substantial impact of uncertainty is similar to the findings from the simulation model suggesting that an effect of this size is consistent with a real options explanation (Dixit and Pindyck).
  从第三个四分位数到第三个四分位数的不确定度从第10个百分点增加到第三个百分位。这种不确定性的实质性影响与模拟模型的研究结果相似，表明这种规模的影响与实物期权的解释一致（Dixit和Pindyck）。

Remarks

评论

Uncertainty creates zones of action/inaction. Uncertainty increases the separation between the marginal product of capital which justifies investment and the marginal product of capital which justifies disinvestment. This increases the range of inaction where investment is zero as the firm prefers to “wait and see” rather than undertaking a costly action with uncertain consequences. The dampened response of investment to demand shocks in this literature suggests that firms will less respond less to monetary and fiscal stimuli in periods of high uncertainty.
  不确定性造成了行动/不行动的区域。不确定性增加了资本边际产出与资本边际产出之间的分离，资本边际产出证明了投资的合理性。这增加了投资为零的不作为的范围，因为公司更愿意“观望”，而不是采取代价高昂、后果不确定的行动。在这篇文献中，投资对需求冲击的反应减弱表明，在高度不确定的时期，企业对货币和财政刺激的反应将更少。

Further reading

1. Bloom, Bond and Van Reenen (2007), Uncertainty and Investment Dynamics, Review of Economic Studies.
2. Bloom, Nicolas (2014), Fluctuations in Uncertainty, Journal of Economic Perspectives.