Effect of exchange rate uncertainty on private sector business fıxed investment

As a result of the globalisation trend, begining from mid 1980?s,economies have become more connected and sensitive to each other. Theeffects of exchange rate uncertanity triggered off floating exchange rate onother macroeconomic variables have been subject to both ampiric andtheoretic studies.In this study, the effects of exchange rate uncertainty on private Sectorbusıness fixed investment have been analyzed and tested ampirically for1987-2005 period of Turkey. In our model, the exchange rate uncertainty havebeen calculated with moving average technique. Total income and interestrate have been included as the other explanatory variables to the modelaccording to the traditional investment theories.As a result of the modeling, a significant relationship between theexchange rate uncertanity and private investment expenditures have beendetermined in the long run. The direction of this relationship is inverseconsistant to the option theory of investment. This result has showed that,exchange rate uncertainty arised after 1980 is one of the preventive factors tobe able to achieve the desired growth in private sector business fixedinvestment in Turkey.Key Words: 1) Investment, 2) Uncertainty, 3) Exchange Rate