Panel data evidence of the impact of exchange rate uncertainty on private investment in South-east Asia

Abstract

This article examines the impact of real exchange rate uncertainty on the private investment in South-east Asia using panel data from four countries of the region namely, Indonesia, Malaysia, the Philippines and Thailand. Annual time series data from 1972 to 2001 is used. Before carrying out the estimation the time series properties of the data are diagnosed and an error correction model is developed and estimated. The model is estimated using both the fixed effects and the random effects estimators. The estimated results from both the estimations, suggest that the real exchange rate uncertainty had a negative effect on the private investment in that region.