The Impact of Inflation Uncertainty on Private Investment in SAARC Member Countries (2002-2022)
DOI:
https://doi.org/10.55544/ijrah.6.1.13Keywords:
Inflation Uncertainty, Private Investment, Exchange Rate, Interest Rates, InflationAbstract
Private investment plays a key role in the economic growth of countries. Governments always strive to adopt appropriate monetary and fiscal policies to promote private sector investments.
The main objective of this research is to examine the impact of inflation uncertainty on private investments in SAARC countries from 2002 to 2022.
The data related to the variables of inflation rate, inflation uncertainty, interest rate, and private investments were collected from the World Bank website and analyzed using the random effects model. The findings reveal that inflation and inflation uncertainty have no significant impact on the level of private investments in SAARC countries.
On the other hand, the discussions on the impact of inflation uncertainties on private investments are still remains weak from an empirical perspective, and their results are often inconsistent.
Federer (1993) and Driver & Moreton (1991) estimated a negative relationship between uncertainty, inflation, and private investments.
Goldberg (1993) did not find a relationship between inflation rate uncertainty, exchange rate, and investment. Hausmann and Gavin (1995), using panel data from various countries, found a negative relationship between investment and inflation uncertainty. Bellini (1996) did not confirm a significant relationship between inflation uncertainty and investment. Moreover, the negative and significant effect of the interest rate on private investment in SAARC member countries was confirmed at a 5% significance level.
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