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Volatility of FDI in Indian manufacturing sector

Author

Listed:
  • Esha Jain
  • Priyanka Banerji
  • Jahanvi Bansal

Abstract

The study was designed to analyse the volatility of FDI in the Indian manufacturing sector along with forecasting future investments by applying the GARCH and ARIMA models. Descriptive and exploratory research designs were followed by analysing the last eleven years of secondary data (from 2008-2009 to 2018-2019) from the published annual reports of RBI. The conditional and unconditional volatility of FDI showed a vigorous result, suggesting a proper classification of conditional variance. The GARCH model analysis showed that the volatility of FDI was very high in the manufacturing sector and showed huge variations in the given time period. With the help of ARIMA model using p, q, d values from ACF and PACF, the forecasted values of FDI in manufacturing sector is calculated for the next three years with 80% and 95% confidence levels which turned out to be approximate 7,919 million USD in all three years but with different upper and bottom level limits. Box-Ljung test was applied to check the stationarity and accuracy of the model and because the p-value is less than 0.05, it can be said that the model is accurate to forecast the future values of FDI in the manufacturing sector.

Suggested Citation

  • Esha Jain & Priyanka Banerji & Jahanvi Bansal, 2024. "Volatility of FDI in Indian manufacturing sector," International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 36(4), pages 381-398.
    • Handle: RePEc:ids:ijbglo:v:36:y:2024:i:4:p:381-398
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