Is interest rate uncertainty a predictor of investment volatility? evidence from the wild bootstrap likelihood ratio approach
Yükleniyor...
Tarih
2022
Yazarlar
Dergi Başlığı
Dergi ISSN
Cilt Başlığı
Yayıncı
Springer
Erişim Hakkı
info:eu-repo/semantics/embargoedAccess
Özet
This paper investigates the ability of interest rate uncertainty to predict investment volatility in nine selected countries. Employing a novel wild bootstrap likelihood ratio approach, the study shows interest rate uncertainty to be a signifcant predictor of investment volatility in all but one of the sampled countries. Overall, we fnd that interest rate uncertainty aggravates investment volatility in the United States, Germany, France, Italy, Spain, United Kingdom, Japan and Sweden. The results remain the same irrespective of whether a 3-month forecast horizon or a 12-month forecast horizon is used. The implication of the study fnding is that the current value of investments more often than not fuctuates in response to uncertain interest rate changes. This suggests that the investment rate is not only dependent on the interest rate level, but on the degree of uncertainty in interest rate movements as well. Interest rate uncertainty is thus an important factor to be considered in investment analysis. This study thus encourages central banks to pay signifcant attention to interest rate stability due to its ability to minimize the distortions in the market mechanism for raising long-term capital.
Açıklama
Anahtar Kelimeler
Interest rate uncertainty · Investment volatility · Wild bootstrap likelihood ratio test
Kaynak
Journal of Economics and Finance
WoS Q Değeri
N/A
Scopus Q Değeri
N/A
