Premium
MACROECONOMIC UNCERTAINTY AND AGGREGATE PRIVATE INVESTMENT IN SOUTH AFRICA
Author(s) -
Kumo Wolassa L.
Publication year - 2006
Publication title -
south african journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.502
H-Index - 31
eISSN - 1813-6982
pISSN - 0038-2280
DOI - 10.1111/j.1813-6982.2006.00071.x
Subject(s) - economics , volatility (finance) , econometrics , investment (military) , exchange rate , inflation (cosmology) , autoregressive conditional heteroskedasticity , estimation , monetary economics , aggregate (composite) , interest rate , macroeconomics , physics , management , politics , theoretical physics , political science , law , materials science , composite material
This paper investigates the effects of time varying uncertainty on aggregate private fixed investment in South Africa. The GARCH generated measures of volatility of selected macroeconomic variables indicating five measures of uncertainty are used in the analysis. These are output growth uncertainty, uncertainty about changes in the real effective exchange rate, uncertainty about changes in the real interest rate, producer inflation uncertainty, and terms of trade uncertainty. The results of the estimation by an empirical ECM model of conventional investment determinants controlling for the effects of uncertainty indicated that, over all, time varying macroeconomic uncertainty significantly reduces private fixed investment.