THE IMPACT OF REAL EXCHANGE RATE UNCERTAINTY ON PRIVATE INVESTMENT IN IRAN

Abstract

This study sought to analyze the impacts of real exchange rate volatilities on investment in the
private sector of the economy of Iran during the period 1961-2008, and also evaluate the
impact of real exchange rate uncertainty on private investment behavior during the period
under study. For this purpose, first, the uncertainty index of the real exchange rate is
determined through auto-regressive patterns of conditional variance heterogeneity (EGARCH)
and then it estimated the model. In this study, the entire economy of Iran has been studied
during 1961-2008. It is a practical research, in terms of the research goal. In this study,
GARCH models to obtain the uncertainty on the time series pattern have been used. Data
analysis method is based on descriptive and inferential statistical research; according to
inferential statistic, the research hypothesis has been tested. To verify or reject the hypothesis
of this study, it was used Eviews software indicates that which variables a correlation exists
between. The dependent variable in this model is ratio of the fixed investment to GDP and the
independent variables include the import of capital goods, governmental investment, inflation
index, GDP and real exchange rate uncertainty. The results showed that the index of real
exchange rate uncertainty has a significant negative effect on private investment to GDP ratio,
and imports of capital commodity and inflation have negative effects on private investment to
GDP ratio.