Macroeconomic Uncertainty and Investment Relationship for Turkey

Pelin Öge Güney (pelinoge@hacettepe.edu.tr)
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Pelin Öge Güney: Hacettepe University, Faculty of Economics and Administrative Sciences, Department of Economics

No 1332, Working Papers from Economic Research Forum

Abstract: 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.

Pages: 23 pages
Date: 2019-08-21, Revised 2019-08-21
New Economics Papers: this item is included in nep-ara and nep-mac
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