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Macroeconomic Uncertainty and Investment – Empirical Analysis for Romania

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  • Saman, Corina

    ()
    (Institute of Economic Forecasting)

Abstract

From a theoretical point of view, uncertainty may have an impact on investment by different channels and in different directions. Thus, the sign of its overall effect is unknown and could be found only empirically from the historical data. This paper analyzes the relation between macroeconomic uncertainty and total investment in Romania over the period 2000-2008. As a source of uncertainty, it considers different measures of volatility in prices and exchange rate from autoregressive conditional heteroskedastic (GARCH) models. These measures are introduced as a linear and a quadratic term in the investment equation. The results prove a nonlinear effect of uncertainty on investment.

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Bibliographic Info

Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

Volume (Year): (2010)
Issue (Month): 2 (July)
Pages: 155-164

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Handle: RePEc:rjr:romjef:v::y:2010:i:2:p:155-164

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Related research

Keywords: investment; uncertainty; irreversibility; economic instability; inflation; exchange rate;

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References

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  1. Pindyck, Robert S. & Solimano, Andres, 1993. "Economic instability and aggregate investment," Policy Research Working Paper Series 1148, The World Bank.
  2. Abel, Andrew B & Eberly, Janice C, 1994. "A Unified Model of Investment under Uncertainty," American Economic Review, American Economic Association, vol. 84(5), pages 1369-84, December.
  3. Joshua Aizenman & Nancy Marion, 1995. "Volatility, Investment and Disappointment Aversion," NBER Working Papers 5386, National Bureau of Economic Research, Inc.
  4. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
  5. Chiara Pederzoli, 2006. "Stochastic Volatility and GARCH: a Comparison Based on UK Stock Data," The European Journal of Finance, Taylor & Francis Journals, vol. 12(1), pages 41-59.
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Cited by:
  1. Andrei, Dalina Maria, 2012. "Foreign Direct Investments in Romania. A Structural and Dynamic View," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 129-146, December.
  2. Mansor Ibrahim & Abdullahi Ahmed, 2013. "Stock Market and Aggregate Investment Behavior in Malaysia: An Empirical Analysis," Transition Studies Review, Springer, vol. 20(2), pages 265-284, October.

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