Document Type

Dissertation

Degree

Doctor of Philosophy (PhD)

Department

Economics

First Advisor's Name

Dimitrios Thomakos

First Advisor's Committee Title

Committee Chair

Second Advisor's Name

Eduardo Gamarra

Third Advisor's Name

John Boyd III

Fourth Advisor's Name

Cem Karayalcin

Date of Defense

3-7-2003

Abstract

The objective of this study was to provide empirical evidence on the effects of relative price uncertainty and political instability on private investment. My effort is expressed in a single-equation model using macroeconomic and socio-political data from eight Latin American countries for the period 1970-1996. Relative price uncertainty is measured by the implied volatility of the exchange rate and political instability is measured by using indicators of social unrest and political violence.

I found that, after controlling for other variables, relative price uncertainty and political instability are negatively associated with private investment. Macroeconomic and political stability are key ingredients for the achievement of a strong investment response. This highlights the need to develop the state and build a civil society in which citizens can participate in decision-making and express consent without generating social turmoil. At the same time the government needs to implement structural policies along with relative price adjustments to eliminate excess volatility in price movements in order to provide a stable environment for investment.

Identifier

FI15101308

Comments

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