MACROECONOMIC UNCERTAINTY AND PRIVATE INVESTMENT: THE CASE OF POLAND
Öz
Analysis of investment decisions is an important macroeconomic subject due to the role of fluctuations in investments on the economic performance. It is argued that investment models need to take this effect into account if uncertainty has an impact on investment. Therefore, the effects of uncertainty on investments have recently been analyzed in the theoretical and empirical literature. While developing economies face more uncertainty than industrial countries do, most empirical studies consider the uncertainty-investment relationship for developed counties. In this paper, we analyzed the effect of the macro economic uncertainties on private investment in a developing county: Poland. We constructed a generalized autoregressive conditional heteroskedasticity (GARCH) model to measure uncertainties. Then, we employed the bound testing procedure to cointegration analysis. Since our findings indicate a long-term relationship of the variables, we adopt an error correction model to capture the dynamic relationship. Our estimates imply that the real exchange rate, inflation and growth uncertainties effect private investments negatively in Poland. Therefore, we can conclude that macroeconomic stabilization is a necessary condition for the continuity of investments in Poland.
Anahtar Kelimeler
Private Investment,Inflation Uncertainty,Exchange Rate Uncertainty,Bound Testing
Kaynakça
- Abel, A. B. (1983). Optimal Investment under Uncertainty. American Economic Review, 73, 228–33.
- Bollerslev, T. (1986). Generalized Autoregressive Conditional Heteroskedasticity. Journal of Econometrics, 31, 307-327.
- Byrne, J.P. and Davis, E.P. (2005). Investment and Uncertainty in the G7. Review of World Economics, 141(1), 1-32.
- Darby, J., Hallett, A.H., Ireland, J. and Piscitelli, L. (1999). The Impact of Exchange Rate Uncertainty on the level of Investment. Economic Journal, 109, C55-C67.
- Demir, F. (2009). Macroeconomic Uncertainty and Private Investment in Argentina, Mexico and Turkey, Applied Economics Letters, 16(6), 567-571.
- Dixit, A., Pindyck, R. (1994). Investment Under Uncertainty, Princeton, NJ: Princeton University Press.
- Easterly, W., Islam, R. and Stiglitz, J. (2000). Explaining Growth Volatility. In Annual World Bank Conference on Development Economics 2000, Oxford University Press.
- Eberly, J. (1993). Comment on Pindyck and Solimano. NBER Macroeconomics Annual, 303-312.
- Engle, R. F., Granger, C.W.J. (1987). Cointegration and Error-correction: Representation, Estimation and Testing. Econometrica, 55(2), 251–276.
- Federer, J. (1993). The Impact of Uncertainty on Aggregate Investment Spending. Journal of Money, Credit and Banking, 25, 30–48.