Macroeconomic Uncertainty and Investment Relationship for Turkey - Economic Research Forum (ERF)

Macroeconomic Uncertainty and Investment Relationship for Turkey

Pelin Öge Güney


Date:
August, 2019

NO.
1332

Length:
23 pages

Publisher:
Economic Research Forum

Topic:
E6. Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
E2. Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy

In the literature it is suggested that, in addition to many factors such as macroeconomic and microeconomic polices, financial institutions and property rights; macroeconomic uncertainties are affecting the investment decisions. In this paper, we analyzed the effect of the real exchange rate, inflation and growth uncertainties on private investment in a developing country; Turkey. We used a generalized autoregressive conditional heteroskedasticity (GARCH) model to measure uncertainties. Then, we investigated the longterm relationship of the variables using bound testing approach. Finally, we adopt an error correction model to capture the dynamic relationship. According to our results macroeconomic uncertainties have a significant negative effect on private investments in Turkey. Therefore, our findings showed the importance of the macroeconomic stability for the continuity of investments in Turkey.

Authors

Pelin Öge Güney

Associate Professor, Hacettepe University, Department of Economics


Project

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