Investigation of exchange rate uncertainty and inflation on investment of construction companies in Iran

The construction industry in the housing sector plays an important role in economic growth due to its significant share in GDP compared to other sectors. One of the most important factors hindering the increase of private sector investment in the construction industry is the faltering of trust. Meanwhile, exchange rate uncertainty and inflation have the most negative impact on the investment of construction companies. The main purpose of this study is to investigate the exchange rate uncertainty and inflation rate on the investment of construction companies in the period 1996-2020. To estimate the model, exchange rate uncertainty has been calculated by GARCH method using exchange rate data, then using GMM method, the effect of exchange rate uncertainty and inflation rate on construction companies investment data has been investigated. The results show that a one percent increase in exchange rate uncertainty and inflation has reduced the investment of construction companies by 0/593 and 0/368 percent, respectively. Also, a one percent increase in economic growth has increased the investment of construction companies by 0/119 percent. Based on the effect of estimated coefficients, the share and importance of the construction sector, identifying investment opportunities and threats in the construction industry, government efforts in the correct and scientific implementation of economic policies in order to stabilize the real exchange rate and price index and awareness of the impact of these variables when planning and setting policies are important.