Real exchange rate uncertainty and private investment in developing countries

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Real exchange rate uncertainty and private investment in developing countries, Volume 1

Author:	Serven, Luis;	Collection Title:	Policy, Research working paper ; no. WPS 2823
Date Stored:	2002/05/15	Document Date:	2002/04/30
Document Type:	Policy Research Working Paper	Language:	English
Major Sector:	(Historic)Private Sector Development	Report Number:	WPS2823
Sub Sectors:	Business Environment	SubTopics:	Environmental Economics & Policies; Achieving Shared Growth; International Terrorism & Counterterrorism; Economic Theory & Research; Payment Systems & Infrastructure; Macroeconomic Management; Economic Stabilization; Fiscal & Monetary Policy
Volume No:	1

Summary: The author examines empirically the link between real exchange rate uncertainty and private investment in developing countries using a large cross country-time series data set. He builds a GARCH-based measure of real exchange rate volatility and finds that it has a strong negative impact on investment, after controlling for other standard investment determinants and taking into account their potential endogeneity. The impact of uncertainty is not uniform, however. There is some evidence of threshold effects, so that uncertainty only matters when it exceeds some critical level. In addition, the negative impact of real exchange rate uncertainty on investment is significantly larger in economies that are highly open and in those with less developed financial systems.


Official Documents Official, scanned versions of documents (may include signatures, etc.)
File Type		Description	File Size (mb)

	PDF 24 pages	Official version*	1.68 (approx.)
	Text	Text version**


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File Type		Description	File Size (mb)

	PDF 21 pages	WPS2823	0.05

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