In this study, we estimate the macroeconomics instability index over the period 1963-2003. Using the definition of Fischer and Bleaney, the study calculates the “macroeconomics instability index”. In order to compute the macroeconomics instability index, four sub-indices of inflation rate, the fractional ratio of budget to the gross national product, the ratio of foreign debt to the gross national product, and the ratio of the free exchange rate to the official exchange rate as the determinant variables of the macroeconomics instability are considered. Then, the study estimates the equations for long-term processes for each variable and determines the deviations from the real values. We also obtain the time series for the macroeconomics instability index, using the calculated simple mean of the variables’ deviations and discuss the results.
In this paper, we perform an empirical study to investigate the impact of economical stability on the amount of investment coming from the private sector. We calculate macroeconomics instability index (MII) using the existing methods in the literature. We have also used Glezakos (1973) method [Glezakos,C.(1973). Export instability and economic growth: A statistical verification. Economic Development and Cultural Change, 21(3), 670-678.], which considers long-term deviation of real values as instability index. Therefore, we use four variables of inflation rate (TINF), the ratio of budget deficit on growth domestic product (GDP) (TBD), foreign debt on GDP (TFD) and the ratio of actual currency rate on nominate currency (TRO). The preliminary results show that the short-term changes on logarithm of investment from private sector (LNIP) with one lag and logarithm of value added (LNIV) have positive impact on LNIP. In addition, any short term changes on logarithm of MII (LNMII) has negative and meaningful impact on LNIP and approximately 0.67 percent of difference between the actual and long term are discounted in each period. The results indicate that instability index has negative effect even in short term on Iran & apos; s industry. This shows the relevant importance of instability on economy.