A study on the effect of macroeconomics instability index on private investment in Iran

• Main Authors: Aziz Saki, Abdolmajid Ahangari
• Format: Article
• Language: English
• Published: Growing Science 2012-10-01
• Series: Management Science Letters
• Subjects: Macroeconomics instability index; Private investment; Econometrics model
• Online Access: http://www.growingscience.com/msl/Vol2/msl_2012_150.pdf

In this paper, we perform an empirical study to investigate the impact of economical stability on the amount of investment coming from the private sector. We calculate macroeconomics instability index (MIX) using the existing methods in the literature. We have also used Glezakos (1973) method [Glezakos,C.(1973). Export instability and economic growth: A statistical verification. Economic Development and Cultural Change, 21(3), 670-678.], which considers long-term deviation of real values as instability index. Therefore, we use four variables of inflation rate (TINF), the ratio of budget deficit on growth domestic product (GDP) (TBD), foreign debt on GDP (TFD) and the ratio of actual currency rate on nominate currency (TFD). The preliminary results show that the short-term changes on LNIP with one lag and LNIV have positive impact on LNIP. In addition, any short term changes on LNMII has negative and meaningful impact on LNIP and approximately 0.67 percent of difference between the actual and long term are discounted in each period. The results indicate that instability index has negative effect even in short term on Iran's industry. This shows the relevant importance of instability on economy.