This paper examines the impact of uncertainty and financial frictions on investment dynamics, using a quantitative general equilibrium model. The authors find that fluctuations in idiosyncratic uncertainty significantly affect investment, primarily through changes in credit spreads. They analyze the relative importance of the "wait-and-see" effect of uncertainty shocks and financial distortions in shaping macroeconomic outcomes. The model replicates key stylized facts about the macroeconomic implications of uncertainty and financial shocks, showing that both types of shocks influence the effective supply of credit, leading to countercyclical credit spreads and procyclical leverage. The results suggest that financial frictions play a crucial role in amplifying the impact of uncertainty shocks on investment and economic activity. Empirical evidence supports these findings, showing that credit spreads are a significant determinant of investment dynamics, while uncertainty has a more attenuated effect once credit spreads are considered. The model also identifies "capital liquidity" shocks as a potential source of aggregate disturbances, highlighting the interaction between capital and debt overhang problems. Overall, the paper provides a comprehensive framework for understanding how uncertainty and financial frictions influence business cycle dynamics.This paper examines the impact of uncertainty and financial frictions on investment dynamics, using a quantitative general equilibrium model. The authors find that fluctuations in idiosyncratic uncertainty significantly affect investment, primarily through changes in credit spreads. They analyze the relative importance of the "wait-and-see" effect of uncertainty shocks and financial distortions in shaping macroeconomic outcomes. The model replicates key stylized facts about the macroeconomic implications of uncertainty and financial shocks, showing that both types of shocks influence the effective supply of credit, leading to countercyclical credit spreads and procyclical leverage. The results suggest that financial frictions play a crucial role in amplifying the impact of uncertainty shocks on investment and economic activity. Empirical evidence supports these findings, showing that credit spreads are a significant determinant of investment dynamics, while uncertainty has a more attenuated effect once credit spreads are considered. The model also identifies "capital liquidity" shocks as a potential source of aggregate disturbances, highlighting the interaction between capital and debt overhang problems. Overall, the paper provides a comprehensive framework for understanding how uncertainty and financial frictions influence business cycle dynamics.