Economic policy uncertainty and investment in Spain

Abstract The aim of this paper is to investigate the effect economic policy uncertainty on firms’ investment decisions. We focus Spain for period 1998–2014. To measure policy-related uncertainty, we borrow (EPU) indicator available country. find strong evidence that reduces corporate investment. This relationship appears be nonlinear, being marginal attenuated toward zero during periods high levels. Furthermore, heterogeneous results suggest adverse particularly relevant highly vulnerable firms. Overall, these are consistent with hypotheses through increases in precautionary savings or worsening credit conditions.