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The joint effect of macroeconomic uncertainty, sociopolitical instability, and public provision on private investment

Author

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  • Monica Escaleras

    (Florida Atlantic University, USA)

  • Constantina Kottaridi

    (University of Piraeus, Greece)

Abstract

Most studies on private investment focus either on macroeconomic conditions or sociopolitical climate to explain private investment patterns. We go a step further and examine empirically the joint effect of macroeconomic uncertainty, sociopolitical instability and public provision on private investment using data from 37 developing countries between 1970 and 2000. Our results show that macroeconomic instability, macroeconomic uncertainty and socio-political instability jointly have a negative impact on private investment. Our empirical findings enable identification of particular social and political imbalance attributes that deter private investment. Furthermore we establish a detrimental effect of public provision, when measured by public investment, on private investment and a beneficial effect when measured by infrastructure availability. Influential policy implications are then developed, especially in the face of the unprecedented Eurozone crisis in the post war period.

Suggested Citation

  • Monica Escaleras & Constantina Kottaridi, 2014. "The joint effect of macroeconomic uncertainty, sociopolitical instability, and public provision on private investment," Journal of Developing Areas, Tennessee State University, College of Business, vol. 48(1), pages 227-251, January-M.
    • Handle: RePEc:jda:journl:vol.48:year:2014:issue1:pp:227-251
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    Citations

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    Cited by:

    1. Arango-Aramburo, Santiago & Jaramillo, Patricia & Olaya, Yris & Smith, Ricardo & Restrepo, Oscar J. & Saldarriaga-Isaza, Adrián & Arias-Gaviria, Jessica & Parra, Juan F. & Larsen, Erik R. & Gomez-Rios, 2017. "Simulating mining policies in developing countries: The case of Colombia," Socio-Economic Planning Sciences, Elsevier, vol. 60(C), pages 99-113.
    2. Tale Geddafa, 2023. "The Effects of Domestic Private Investment on Ethiopian Economic Growth: Time Series Analysis," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 13(4), pages 26-56.
    3. Akçay Selçuk & Karasoy Alper, 2020. "Determinants of private investments in Turkey: Examining the role of democracy," Review of Economic Perspectives, Sciendo, vol. 20(1), pages 23-49, March.

    More about this item

    Keywords

    private investment; real exchange rate; sociopolitical instability; public provision;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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