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Exchange rate uncertainty and the level of investment in selected South-east Asian countries

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Author Info

  • Gyan Pradhan
  • Zeljan Schuster
  • Kamal Upadhyaya

Abstract

The effect of real exchange rate uncertainty on aggregate private investment in Indonesia, Malaysia, the Philippines and Thailand is examined using time series data from 1972-2000. Since the use of non-stationary time series data may produce spurious results, the data series are tested for stationarity using the augmented Dickey-Fuller and Phillips-Perron tests. After establishing the stationarity of the data series, cointegration tests are performed. The cointegration test results reject the hypothesis of no cointegration. Therefore, an error correction model is developed and estimated. The estimated results point to an inconclusive empirical relationship between real exchange rate volatility and aggregate private investment.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/0003684042000282498
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Bibliographic Info

Article provided by Taylor and Francis Journals in its journal Applied Economics.

Volume (Year): 36 (2004)
Issue (Month): 19 ()
Pages: 2161-2165

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Handle: RePEc:taf:applec:v:36:y:2004:i:19:p:2161-2165

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References

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  1. Phillips, P.C.B., 1986. "Testing for a Unit Root in Time Series Regression," Cahiers de recherche 8633, Universite de Montreal, Departement de sciences economiques.
  2. Darby, Julia & Hughes Hallett, Andrew & Ireland, Jonathan & Piscitelli, Laura, 1998. "The Impact of Exchange Rate Uncertainty on the Level of Investment," CEPR Discussion Papers 1896, C.E.P.R. Discussion Papers.
  3. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  4. Kwanho Shin & Jaewoo Lee, 2000. "The Role of a Variable Input in the Relationship between Investment and Uncertainty," American Economic Review, American Economic Association, vol. 90(3), pages 667-680, June.
  5. Abel, Andrew B, 1983. "Optimal Investment under Uncertainty," American Economic Review, American Economic Association, vol. 73(1), pages 228-33, March.
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Cited by:
  1. Jer-Shiou Chiou & Pei-Shan Wu & Ming-Chih Lee, 2006. "Variation of interest-rate parity and its asymmetry on stock return in a jump-diffusion process," Applied Financial Economics, Taylor and Francis Journals, vol. 16(17), pages 1309-1316.
  2. Bianca Clausen, 2008. "Real Effective Exchange Rate Uncertainty, Threshold Effects, and Aggregate Investment – Evidence from Latin American Countries," IWP Discussion Paper Series 02/2008, Institute for Economic Policy, Cologne, Germany.

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