Abstract
The relationship between macroeconomic uncertainty, investment and economic growth is an empirical issue in developing countries. This paper investigates the effects of macroeconomic uncertainty on investment and economic growth in Pakistan for the period 1975–2008 by using the accelerator model of investment and endogenous growth model. The conditional variances, directly estimated through the Generalized Autoregressive Conditional Heteroscedasticity (GARCH) model is utilized for erecting the uncertainty variables related to fiscal policy, openness and foreign capital inflows. The results clearly indicate that the macroeconomic uncertainty have significant negative effects on investment and per capita income of Pakistan. We conclude that a reduction in macroeconomic uncertainty through appropriate fiscal and monetary policy, stability in capital inflows and improved trade performance could result in high investment and sustainable economic growth in the country.
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Notes
In a cross-country studies they used output variable for estimate of uncertainty variable and check whether the uncertainty of output affect the investment decision of countries.
This seems existence of an uncertainty Laffer curve.
See Goel and Ram (2001).
According to Barro (1991), human capital plays a special role in model of endogenous economic growth, an additional human capital have a tendency to grow more rapidly because it catch up the new technological leader.
For each uncertainty measures we have estimated separate regression.
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Fatima, A., Waheed, A. Effects of Macroeconomic Uncertainty on Investment and Economic Growth: Evidence from Pakistan. Transit Stud Rev 18, 112–123 (2011). https://doi.org/10.1007/s11300-011-0188-0
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DOI: https://doi.org/10.1007/s11300-011-0188-0