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Title: Panel estimation of the impact of exchange rate uncertainty on investment in the major industrial countries
Authors: Byrne, JP
Davis, EP
Keywords: Investment;Uncertainty;Panel Estimation;Components GARCH
Issue Date: 2003
Publisher: Brunel University
Citation: Economics and Finance Working papers, Brunel University, 03-05
Abstract: We estimate the impact of exchange rate uncertainty on investment, using panel estimation featuring a decomposition of exchange rate volatility derived from the components GARCH model of Engle and Lee (1999). For a poolable subsample of EU countries, it is the transitory and not the permanent component of volatility which adversely affects investment, implying high frequency shocks of the type that may be generated by volatile short term capital flows are most deleterious for investment. Results based on EGARCH also suggest that the response of investment to exchange rate uncertainty may depend partly on the sign of the initial shock. (100 words)
Appears in Collections:Economics and Finance
Dept of Economics and Finance Research Papers

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