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The joint effect of macroeconomic uncertainty, sociopolitical instability, and public provision on private investment

Monica Escaleras and Constantina Kottaridi ()
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Monica Escaleras: Florida Atlantic University, USA

Journal of Developing Areas, 2014, vol. 48, issue 1, 227-251

Abstract: Most studies on private investment focus either on macroeconomic conditions or sociopolitical climate to explain private investment patterns. We go a step further and examine empirically the joint effect of macroeconomic uncertainty, sociopolitical instability and public provision on private investment using data from 37 developing countries between 1970 and 2000. Our results show that macroeconomic instability, macroeconomic uncertainty and socio-political instability jointly have a negative impact on private investment. Our empirical findings enable identification of particular social and political imbalance attributes that deter private investment. Furthermore we establish a detrimental effect of public provision, when measured by public investment, on private investment and a beneficial effect when measured by infrastructure availability. Influential policy implications are then developed, especially in the face of the unprecedented Eurozone crisis in the post war period.

Keywords: private investment; real exchange rate; sociopolitical instability; public provision (search for similar items in EconPapers)
JEL-codes: E62 F31 H54 (search for similar items in EconPapers)
Date: 2014
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Handle: RePEc:jda:journl:vol.48:year:2014:issue1:pp:227-251