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Macroeconomic Uncertainty and Investment – Empirical Analysis for Romania

Author

Listed:
  • 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.

Suggested Citation

  • Saman, Corina, 2010. "Macroeconomic Uncertainty and Investment – Empirical Analysis for Romania," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 155-164, July.
  • Handle: RePEc:rjr:romjef:v::y:2010:i:2:p:155-164
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    File URL: http://www.ipe.ro/rjef/rjef2_10/rjef2_10_9.pdf
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    References listed on IDEAS

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    1. Joshua Aizenman & Nancy Marion, 1995. "Volatility, Investment and Disappointment Aversion," NBER Working Papers 5386, National Bureau of Economic Research, Inc.
    2. Robert S. Pindyck & Andrés Solimano, 1993. "Economic Instability and Aggregate Investment," NBER Chapters,in: NBER Macroeconomics Annual 1993, Volume 8, pages 259-318 National Bureau of Economic Research, Inc.
    3. Abel, Andrew B & Eberly, Janice C, 1994. "A Unified Model of Investment under Uncertainty," American Economic Review, American Economic Association, vol. 84(5), pages 1369-1384, December.
    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.
    Full references (including those not matched with items on IDEAS)

    Citations

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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;Central Eastern European University Network (CEEUN), vol. 20(2), pages 265-284, October.
    3. Alexandru MANOLE & Constantin ANGHELACHE & Madalina Gabriela ANGHEL & Andreea MARINESCU, 2016. "Sensitivity analysis methods in uncertainty environment," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 64(8), pages 59-69, August.

    More about this item

    Keywords

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

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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