Investigating the Asymmetric Effects of Exchange Rate Fluctuations on Investment in Manufacturing and Mining: Approach NARDL

Document Type : Scientific-research

Authors

1 PhD student in Monetary and Financial Economics, Sistan and Baluchestan University

2 Associate Professor, Department of Economics, Sistan and Baluchestan University

3 a

4 Assistant Professor of Accounting Department of Hazrat Masoumeh University of Qom

Abstract

Manufacturing investment due to the strong backward and forward linkages with other sectors plays an important role in determining the business cycles. In this regard, the purpose of this study is to investigate the asymmetric effect of exchange rate volatility on gross fixed capital formation in manufacturing ang mining sector by applying the NARDL approach and in terms of structural breaks in annual time series data of the Iranian economy during the period 1974-2018.
The results show that the estimated model is non linear. Additionally, the effect of exchange rate shocks on the investment in manufacturing and mining in the short term and long term are asymmetric. It is worth mentioning that one percent increase in positive and negative shocks, in exchange rate fluctuations with coefficients of 1.62 and 0.84, respectively, have the negative and significant effects on investment. In addition, the real rate of returns on facilities with a coefficient of 2.71 has a negative and significant effect on investment. Also, manufacturing value-added growth with a cofficient of 1.6 and outstanding facilities by banks and credit institutions to manufacturing and mining sector with a cofficient of 0.31 have positive and significant effects on investment.

Keywords

References

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Journal of Iranian Economic Issues
Volume 7, Issue 1
August 2020
Pages 31-52

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History

  • Receive Date: 10 January 2020
  • Revise Date: 30 March 2020
  • Accept Date: 12 April 2020

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