Designing Investment conditions uncertainty index

Subject Areas : Journal of Investment Knowledge

Ezatollah Abbasian ¹ , Tahmaseb Mazaheri ² , Saied Sehhat ³ , Mehri Akbari ⁴

1 - Associate Professor in Economics, Department of Public Administration, Faculty of Management, University of Tehran, Tehran, Iran
2 - Assistant Professor, Department of Finance and Insurance, Faculty of Management, University of Tehran, Tehran, Iran
3 - Associate Professor, Department of Business Administration & Insurance, Faculty of Management & Accounting, Allameh Tabataba’i University
4 - Ph.D. Candidate / Department of Finance and Insurance, Faculty of Management, University of Tehran, Tehran, Iran,

Received: 2019-10-29 Accepted : 2019-12-30 Published : 2022-03-21

Keywords: Generalized Autoregressive Conditional Heteroskedastisity, Investment conditions uncertainty index, foreign direct investment, Panel data,

Abstract :

Economic uncertainty and foreign investment have always been the focus of researchers, policymakers and investors, but what has been overlooked is the measurement of economic uncertainty with a focus on foreign investment. Therefor the purpose of this study is to design an investment conditions uncertainty index by identifying the economic factors affecting FDI inflows in the largest owners of gas reserves including. For this purpose, first the economic variables affecting foreign direct investment are modeled and identified using annual data from 1997 to 2017 of Russia, Iran and Qatar and the Feasible Generalized Least Squares method in the data panel. According to the results, GDP growth, inflation, real interest rate, stock market capitalization and trade openness have significant effect on foreign direct investment. After identifying influential variables, using monthly and seasonal data for the maximum available time period, after estimating the types of GARCH models and determining the optimal model for each variable, the optimal criterion of their fluctuations is calculated. Finally, using the obtained criteria and weighting based on the results of the panel model, Investment conditions uncertainty index for each country is constructed. According to the results, Trend of mentioned index clearly shows the fluctuations due to economic changes in different countries and its compliance with macroeconomic, monetary and fiscal policies adopted by governments, so that, it can be a useful guide for our country's policymakers, It also provides an appropriate scale for assessing the uncertainty of countries by policymakers, investors and researchers at macro and micro level.

References:

• اسدنژاد، اعظم، ترابی، تقی و رادفر، رضا (۱۳۹۵). تاثیر کیفیت سرمایه انسانی بر جذب سرمایه‌گذاری خارجی مستقیم خارجی: مطالعه موردی کشورهای منتخی جنوب شرق آسیا و ایران. فصلنامه علمی پژوهشی دانش سرمایه‌گذاری. سال پنجم، شماره۱۹، صص ۲۵۳-۲۳۵.


• اسلامی، محسن و حسین‌زاده، وحید (۱۳۹۷). عوامل موثر بر جذب سرمایه‌گذاری مستقیم خارجی در فدراسیون روسیه. مطالعات اوراسیای مرکزی، سال یازدهم، شماره۲، صص ۳۰۳-۲۸۳.


• شیرزادی، رضا (۱۳۹۶). دولت،‌توسعه اقتصادی و ادغام در اقتصاد جهانی (مطالعه موردی روسیه: ۲۰۱۰-۱۹۹۰. مطالعات اوراسیای مرکزی، دوره ۱۰، شماره ۱، صص ۱۵۲-۱۳۵.


•  


•  


•  


•  


• Ang, James B. (2008). Determinants of Foreign Direct Investment in Malaysia. Journal of Policy Modeling, 30, 185–189


• Asamoah, Michael Effah; Adjasi, Charles K.D. and Alhassan, Abdul Latif (2016). Macroeconomic Uncertainty, Foreign Direct Investment and Institutional Quality: Evidence from Sub-Saharan Africa. Economic Systems. 40, 612–621


• Atta-Mensah J. (2004). Money demand and economic uncertainty. Bank of Canada Working Paper. 25.


• Baker, Scott R., Bloom, Nicholas and Davis, Steven J. (2016). Measuring Economic Policy Uncertainty. The Quarterly Journal of Economics. 131(4), 1593-1636.


• Berger, Tino, Grabert, Sibylle, and Kempa, Bernd (2017). Global macroeconomic uncertainty. Journal of Macroeconomics. 53, 42–56.


• Bloom, Nicholas (2014). Fluctuation in Uncertainty. Journal of Economic Perspectives. 28(2), 153-176.


• Bontempi, Maria Elena, Golinelli, Roberto, Squadrani, Matteo (2016). A New Index of Uncertainty Based on Internet Searches: A Friend or Foe of Other Indicators?. Quaderni - Working Paper DSE. 1062


• Bosire, Eric M. (2018). Macro-economic Factors and Foreign Direct Investment Flows into Eastern Africa Region. International Journal of Economics and Financial Issues. 8(5), 200-209.


• Dakhlaoui, Imen and Aloui, Chaker (2016). The interactive relationship between the US economic policy uncertainty and BRIC stock markets. International Economics. 146 (C), 141-157.


• Datta, Deepa, Juan M. Londono, Bo Sun, Daniel Beltran, Thiago Ferreira, Matteo Iacoviello, Mohammad R. Jahan-Parvar, Canlin Li, Marius Rodriguez, and John Rogers (2017). Taxonomy of Global Risk, Uncertainty, and Volatility Measures. International Finance Discussion Papers, 1216.


• Demirhan, Erdal and Masca, Mahmut (2008). Determinants of Foreign Direct Investment Flows to Developing Countries: A Cross-Sectional Analysis. Prague Economic Papers, 4, 356-369.


• Dixit, Avinash and Pindyck, Robert (1994). Investment under Uncertainty. Princeton U. press, 2.


• Dua, Pami and Garg, Reetika (2015). Macroeconomic Determinants of Foreign Direct Investment: Evidence from India. The Journal of Developing Areas, 49(1), 133-155.


• El-Chaarani, Hani (2019). The Impact of Oil Prices on Stocks Markets: New Evidence During and After the Arab Spring in Gulf Cooperation Council Economies. International Journal of Energy Economics and Policy, 9(4), 214-223.


• Erdal, Bahar (2018). The Relationship between Sectoral Foreign Direct Investment and Macroeconomic Variables: Empirical Evidence from Turkey. Journal of Applied Finance & Banking, 8(3), 27-48.


• Erdem, Havvanur Feyza and Yamak, Rahmi (2016). Measuring the Optimal Macroeconomic Uncertainty Index for Turkey. Economic Annals, LXI (210), 7-22.


• Erdogan, Mahmut and Unver, Mustafa (2015). Determinants of Foreign Direct Investments: Dynamic Panel Data Evidence. International Journal of Economics and Finance, 7(5), 82-95.


• Fanta, Fassil (2013). Financial Deregulation, Economic Uncertainty and the Stability of Money Demand in Australia. Economic Papers 32(4), 496–511.


• Ferrara, Laurent and Guérin, Pierre (2018). What Are the Macroeconomic Effects of High‐Frequency Uncertainty Shocks? Journal of Applied Econometrics, 662-679.


• Fischer, Stanley (1993). The Role of Macroeconomic Factors in Growth. National Bureau of Economic Research, Working Paper, 4565


• Gan, Pei-Tha (2014). The Optimal Economic Uncertainty Index: A Grid Search Application. Computational Economics, 43, 159-182.


• Henzel, Steffen R. And Rengel, Malte (2017). Dimensions of Macroeconomic Uncertainty: A Common Factor Analysis. Economic Inquiry. 55(2) 843–877.


• Ibrahim, Ibrahim and Harrigan, Frank (2012). Qatar's Economy: Past, Present and Future. QScience Connect, 9, 1-24.


• Jurado, Kyle, Ludvigson, Sydney C. and NG, Serena (2015). Measuring Uncertainty. American Economic Review 105(3), 1177–1216.


• Kariuki, Caroline (2015). The Determinants of Foreign Direct Investment in the African Union. Journal of Economics, Business and Management, 3(3), 346-351.


• Kumari, Reenu and Sharma, Anil Kumar (2017). Determinants of foreign direct investment in developing countries: a panel data study. International Journal of Emerging Markets, 12(4), 658-682.


• Kueh, Jerome Swee-Hui, Puah, Chin-Hong and Liew, Venus Khim-Sen (2014). Macroeconomic Determinants of Direct Investment Abroad of Singapore. Engineering Economics, 25(1), 72–81.


• Makhavikova, Hanna (2018). Determinants of FDI in Central and Eastern Europe. Springer, Cham.


• Murshed, Hasan and Nakibullah, Ashraf (2015). Price level and inflation in the GCC countries. International Review of Economics and Finance, 39, 239-252.


• Musallam, Sami RM (2017). Macroeconomic Determinants of Inward Foreign Direct Investment into Qatar. International journal of Business Management, 2(4), 18-25.


• Nwosa, Philip Ifeakachukwu (2018). Does Stock Market Development Spurs Capital Inflows In Nigeria? Nile Journal of Business and Economics, 9, 22-29.


• Organization of the Petroleum Exporting Countries (2016). 2016 OPEC World Oil Outlook. http://www.opec.org.


• Pindyck, Robert (1990). Irreversibility, Uncertainty, and Investment. Massachusetts Institute of Technology Cambridge, MA 02139.


• Qamruzzaman, Md and Wei, Jianguo (2019). Do financial inclusion, stock market development attract foreign capital flows in developing economy: a panel data investigation. Quantitative Finance and Economics, 3(1), 88–108.


• Saini,Neha and Singhania, Monica (2016). Determinants of FDI in developed and developing countries: a quantitative analysis using GMM. Journal of Economic Studies, 45(2), 348-382. https://doi.org/10.1108/JES-07-2016-0138


• Saleem, Hummera, Jiandong, Wen, Bilal Khan, Muhammad and Khilji, Bashir Ahmad (2018). Reexamining the Determinants of Foreign Direct Investment in China. Transnational Corporations Review, 10(1), 53-68.


• Tan, Yan-Ling, Habibullah, Muzafar Shah, Kaliappan, Shivee Ranjanee and Radam, Alias (2017). Some New Estimates of Shadow Economy for 80 Countries Using Pooled Mean Group Estimator. International Journal of Business and Society, 18(1), 133-156.


• Xaypanya, Phonesavanh, Rangkakulnuwat, Poomthan and Warunsiri Paweenawat, Sasiwimon (2015). The Determinants of Foreign Direct Investment in ASEAN. International Journal of Social Economics, 42(3), 239 – 250.


• https://fa.wikipedia.org/wiki/انتخابات_ریاست‌جمهوری_ایالات_متحده_آمریکا (۲۰۱۶/۸/۱۱)


• https://fa.wikipedia.org/wiki/(۲۰۱۹/۱۷/۱۰)-خروج_آمریکا_از_برجام-


• https://basirat.ir/fa/news/301328/۲ خرداد ۱۳۹۶-نگاهی-به-تحریم-های-ایران


• https://en.wikipedia.org/wiki/Economic_history_of_the_Russian_Federation-May 2014