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Pelin Öge Güney
Faculty of Economics and Administrative Sciences, Department of Economics, Hacettepe University, Ankara, Turkey
Economics, Econometrics & Finance

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Macroeconomic uncertainty and investment relationship for Turkey Pelin Öge Güney
Economic Journal of Emerging Markets Volume 12 Issue 2, 2020
Publisher : Universitas Islam Indonesia

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.20885/ejem.vol12.iss2.art3

Abstract

Macroeconomic uncertainties are expected to affect investment decisions. This study analyzes the effect of the real exchange rate, inflation, and growth uncertainties on private investment in Turkey, an emerging country. While a generalized autoregressive conditional heteroskedasticity (GARCH) model is adopted to measure uncertainties, the existence of a long-run relationship of the variables is assessed using the bound testing approach. Finally, an error correction model is estimated to capture the dynamic relationship. Findings/Originality: The results for the short-run dynamic estimation show that both inflation and real exchange rate uncertainties have a significant negative effect on investments. As for the long-run equilibrium, exchange rate, inflation, and growth uncertainties have a negative impact on private investments. The application of inflation targeting and exchange rate stabilization policy might effectively reduce uncertainty on investments, thus supporting economic growth in the short term.
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