Asymmetric effects of uncertainty on investment: Empirical evidence from India

Abstract

Investment is envisaged as a prerequisite for improving productivity and growth in any economy. In India, investment has decelerated during the global financial crisis (GFC) of 2008, especially after 2011–12, which has spurred a heated discussion regarding causes accountable for elongated slowdown. To this end, we empirically examine the causal nexus between investment and its covariates in an asymmetric framework. The present study finds asymmetric cointegration along with short-run impact asymmetry, long-run reaction asymmetry, and adjustment asymmetry between investment and its covariates. Furthermore, evidence of asymmetric Granger causality is also established. Our study's conclusions have important policy outcomes to combat the economy's downturn in investment.