Energy Price Uncertainty and Investment: Firm Level Evidence from Indian Manufacturing Sector

Authors

  • Rajesh H. Acharya Assistant Professor Department of Humanities, Social Sciences and Managenent National Institute of Technology Karnataka, Surathkal Srinivasanagar Post, Mangalore Karnataka, India 575 025
  • Anver C. Sadath

Abstract

Uncertainty whatsoever has undoubtedly been deemed to be malevolent to the interests of investors. Theories of partial irreversibility of investment argue that uncertainty at the micro level negatively impacts the firm's investment and thereby, at least, slow the process of capital accumulation. Therefore, the present study, empirically analyzes how energy price uncertainty affects investment decisions of manufacturing firms in India.  A variety of panel data models are estimated using Generalized Method of Moments (GMM) with data pertaining to  Indian manufacturing firms over the period 1992- 93 to 2013- 14. Results are consistent with irreversible investment literature on the supply side of production, which shows that energy uncertainty has a negative effect on the capital accumulation in the manufacturing sector and this effect transpires in the form of firm's inability to adjust its actual capital stock to match up to its potential desired capital stock as proposed by the investment theories.Keywords: Energy Price Uncertainty, Irreversible Investment, Energy IntensityJEL Classifications: C23, D80, E20, Q41.

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Author Biography

Rajesh H. Acharya, Assistant Professor Department of Humanities, Social Sciences and Managenent National Institute of Technology Karnataka, Surathkal Srinivasanagar Post, Mangalore Karnataka, India 575 025

Assistant ProfessorDepartment of Humanities, Social Sciences and Managenent

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Published

2016-07-22

How to Cite

Acharya, R. H., & Sadath, A. C. (2016). Energy Price Uncertainty and Investment: Firm Level Evidence from Indian Manufacturing Sector. International Journal of Energy Economics and Policy, 6(3), 364–373. Retrieved from https://econjournals.com./index.php/ijeep/article/view/1425

Issue

Vol. 6 No. 3 (2016)

Section

Articles

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