The UK government has frequently stated its commitment to encouraging higher levels of private sector investment and employment. An important policy lever for obtaining these objectives is the provision of macro-economic stability. Empirically testing the role of uncertainty in determining investment and employment, however, has lagged behind the theoretical literature because of the difficulties in translating the theoretical models into an empirical framework. As a result, the empirical literature has taken a variety of reduced form approaches, generating little overall consensus on the sign or magnitude of the effects of uncertainty. This research project uses simulation methods to develop a structural model for estimating the effects of uncertainty on both investment and labour demand. By directly aggregating up from the underlying theoretical model using simulation techniques it develops an empirical framework which can deal with these aggregation problems. This allows it to address two central questions in the economic and policy debate: 1)What effect does the level of demand uncertainty have on the short run dynamics of the response of investment and employment to demand shocks? 2)What effect does the level of demand uncertainty have on the employment of capital and labour inputs in the longer term?