This paper aims to examine how financial crises and economic uncertainty influence investment decisions in BRICS countries, focusing on uncertainty avoidance and regional disparities. It explores how institutional and spatial factors shape investment outcomes, offering a novel perspective beyond traditional gross domestic product (GDP)-centric models.
Dynamic panel models are applied using data from 1987 to 2023 across ten BRICS countries, incorporating spatial analysis to assess regional disparities. The study integrates cultural and governance indicators (e.g. Uncertainty Avoidance Index (UAI), World Uncertainty Index (WUI) and World Values Survey (WVS)) to examine how these factors interact with financial crises, including banking, currency, and debt crises. Endogeneity is addressed using system-generalized method of moments (GMM) estimators and time dummies to control for contemporaneous shocks.
The study finds that financial crises significantly reduce investment in countries with low tolerance for uncertainty, with the magnitude of this effect influenced by regional disparities. Regions with stronger institutions and lower uncertainty avoidance show more resilient investment behavior. The results suggest that investment recovery during crises is hindered more than GDP in BRICS countries, emphasizing the importance of understanding investment behavior over traditional economic measures.
This paper introduces the concept of the spatial gap in investment behavior, enhancing the understanding of economic resilience. It contributes to the literature by examining the interaction between spatial disparities, uncertainty avoidance and institutional dynamics, offering new insights into financial policies in BRICS countries during crises.
