Panel Estimation of the Impact of Uncertainty on Investment in the Industrial Countries

Joseph Byrne and E Davis ()

No 34, Royal Economic Society Annual Conference 2003 from Royal Economic Society

Abstract: There is growing interest in economic uncertainty and its long run impact on investment. In previous work the authors established clear evidence of the negative impact of exchange rate uncertainty on investment in the G7, measured using a GARCH approach, and Pooled Mean Group Panel Estimation. In this paper we assess the impact on investment of temporary and permanent components of exchange rate uncertainty derived using a components GARCH model. For a poolable subsample of EU countries, results suggest that it is the transitory and not the permanent component which adversely affects investment.

Keywords: investment; uncertainty; exchange rates; non stationary panel estimation (search for similar items in EconPapers)
JEL-codes: E22 F31 (search for similar items in EconPapers)
Date: 2003-06-04
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