Dynamic Relationship between Inflation Uncertainty and Private Investment in Iran: An Application of VAR-GARCH-M Model
This paper empirically investigates the relationship between CPI inflation uncertainty, and private investment in the Iranian economy from 1988 to 2010 by using quarterly data. We employ a bivariate VAR(5)-GARCH(1,1)-in-mean with diagonal BEKK model to discover in a unified framework how are the int...
| Format: | Article |
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| Language: | English |
| Published: |
University of Sistan and Baluchestan
2013-04-01
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| Series: | International Journal of Business and Development Studies |
| Subjects: | |
| Online Access: | https://ijbds.usb.ac.ir/article_1499_60a64d31646c33373abf312a1d7f4418.pdf |
| _version_ | 1827925057324711936 |
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| collection | DOAJ |
| description | This paper empirically investigates the relationship between CPI inflation uncertainty, and private investment in the Iranian economy from 1988 to 2010 by using quarterly data. We employ a bivariate VAR(5)-GARCH(1,1)-in-mean with diagonal BEKK model to discover in a unified framework how are the interactions between the variables. In the model, conditional variance of inflation and private investment are interpreted as inflation and private investment uncertainties, respectively. Our empirical finding shows that, 1) there are bidirectional mean spillovers between inflation and private investment, 2) private investment uncertainty affects private investment negatively, 3) private investment uncertainty doesn’t affect inflation, 4) inflation uncertainty affects inflation positively, and 5) inflation uncertainty affects private investment negatively, supporting Pindyck (1982, 1988, 1991), Caballero (1991), Ferderer (1993a), Caballero and Pindyck (1996). |
| first_indexed | 2024-03-13T05:19:44Z |
| format | Article |
| id | doaj.art-f3ddff55bcf6434e973618a068fc2385 |
| institution | Directory Open Access Journal |
| issn | 2538-3302 2538-3310 |
| language | English |
| last_indexed | 2024-03-13T05:19:44Z |
| publishDate | 2013-04-01 |
| publisher | University of Sistan and Baluchestan |
| record_format | Article |
| series | International Journal of Business and Development Studies |
| spelling | doaj.art-f3ddff55bcf6434e973618a068fc23852023-06-15T16:54:10ZengUniversity of Sistan and BaluchestanInternational Journal of Business and Development Studies2538-33022538-33102013-04-0151617610.22111/ijbds.2013.14991499Dynamic Relationship between Inflation Uncertainty and Private Investment in Iran: An Application of VAR-GARCH-M ModelThis paper empirically investigates the relationship between CPI inflation uncertainty, and private investment in the Iranian economy from 1988 to 2010 by using quarterly data. We employ a bivariate VAR(5)-GARCH(1,1)-in-mean with diagonal BEKK model to discover in a unified framework how are the interactions between the variables. In the model, conditional variance of inflation and private investment are interpreted as inflation and private investment uncertainties, respectively. Our empirical finding shows that, 1) there are bidirectional mean spillovers between inflation and private investment, 2) private investment uncertainty affects private investment negatively, 3) private investment uncertainty doesn’t affect inflation, 4) inflation uncertainty affects inflation positively, and 5) inflation uncertainty affects private investment negatively, supporting Pindyck (1982, 1988, 1991), Caballero (1991), Ferderer (1993a), Caballero and Pindyck (1996).https://ijbds.usb.ac.ir/article_1499_60a64d31646c33373abf312a1d7f4418.pdfinflation uncertaintyprivate investment uncertaintybivariate garch model |
| spellingShingle | Dynamic Relationship between Inflation Uncertainty and Private Investment in Iran: An Application of VAR-GARCH-M Model International Journal of Business and Development Studies inflation uncertainty private investment uncertainty bivariate garch model |
| title | Dynamic Relationship between Inflation Uncertainty and Private Investment in Iran: An Application of VAR-GARCH-M Model |
| title_full | Dynamic Relationship between Inflation Uncertainty and Private Investment in Iran: An Application of VAR-GARCH-M Model |
| title_fullStr | Dynamic Relationship between Inflation Uncertainty and Private Investment in Iran: An Application of VAR-GARCH-M Model |
| title_full_unstemmed | Dynamic Relationship between Inflation Uncertainty and Private Investment in Iran: An Application of VAR-GARCH-M Model |
| title_short | Dynamic Relationship between Inflation Uncertainty and Private Investment in Iran: An Application of VAR-GARCH-M Model |
| title_sort | dynamic relationship between inflation uncertainty and private investment in iran an application of var garch m model |
| topic | inflation uncertainty private investment uncertainty bivariate garch model |
| url | https://ijbds.usb.ac.ir/article_1499_60a64d31646c33373abf312a1d7f4418.pdf |