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Box-Jenkins ARIMA approach to predicting net FDI inflows in Zimbabwe

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  • Nyoni, Thabani

Abstract

This study attempts to model and forecast net FDI inflows in Zimbabwe over the next 2 decades. Spanning from 1980 – 2017, annual time series data for net FDI inflows in Zimbabwe was used. The ADF test indicates that FDI data is I (1). The study identifies the minimum AIC value and subsequently presents ARIMA (1, 1, 1) model as the optimal model to forecast FDI in Zimbabwe. The ADF test also indicates that the residuals of the ARIMA (1, 1, 1) model are I (0), thus confirming its adequacy. A diagnosis of the inverse roots of AR/MA polynomials confirms that our estimated model is stable. The predicted net FDI inflows over the next 2 decades show a relatively poor and unimpressive growth trend. Amongst the main policy prescriptions, the study recommends that policy makers in Zimbabwe ought to come up with investor – friendly policies in order to attract the much needed FDI.

Suggested Citation

  • Nyoni, Thabani, 2018. "Box-Jenkins ARIMA approach to predicting net FDI inflows in Zimbabwe," MPRA Paper 87737, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:87737
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    References listed on IDEAS

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    1. Romer, Paul, 1993. "Idea gaps and object gaps in economic development," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 543-573, December.
    2. Kenny, Geoff & Meyler, Aidan & Quinn, Terry, 1998. "Bayesian VAR Models for Forecasting Irish Inflation," MPRA Paper 11360, University Library of Munich, Germany.
    3. Dailami, Mansoor & Walton, Michael, 1989. "Private investment, government policy, and foreign capital in Zimbabwe," Policy Research Working Paper Series 248, The World Bank.
    4. Farayi Gwenhamo, 2009. "Foreign Direct Investment in Zimbabwe: The Role of Institutional Factors," Working Papers 144, Economic Research Southern Africa.
    5. Marco Huwiler & Daniel Kaufmann, 2013. "Combining disaggregate forecasts for inflation: The SNB's ARIMA model," Economic Studies 2013-07, Swiss National Bank.
    6. Quader, Syed Manzur, 2009. "Foreign Direct Investment in Bangladesh: An Empirical Analysis on its Determinants and Impacts," MPRA Paper 26134, University Library of Munich, Germany.
    7. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
    8. Raymond Vernon, 1966. "International Investment and International Trade in the Product Cycle," The Quarterly Journal of Economics, Oxford University Press, vol. 80(2), pages 190-207.
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    More about this item

    Keywords

    AR; ARIMA; ARMA; Foreign Direct Investment (FDI); forecasting; MA; Zimbabwe;

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • G1 - Financial Economics - - General Financial Markets

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