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Predictive Ability of Competing Models for South Africa’s Fixed Business Non- Residential Investment Spending

Author

Listed:
  • Renee van Eyden

    () (Department of Economics, University of Pretoria)

  • Goodness C. Aye

    () (Department of Economics, University of Pretoria)

  • Rangan Gupta

    () (Department of Economics, University of Pretoria)

Abstract

The study evaluates the forecasting ability of models of South Africa’s real fixed business nonresidential investment spending growth over the recent 2003:1–2011:4 out-of-sample period. The forecasting models are based on the Accelerator, Neoclassical, Cash-Flow, Average Q, Stock Price and Excess Stock Return Predictors models of investment spending. The Average Q, Stock Price and Return Predictors models appear more important in forecasting the behaviour of South Africa’s business investment spending growth over the recent 2003:1–2011:4 out-of-sample period. The results from this study point to the important role of the stock market in promoting investment growth in South Africa, underscoring the need for stock market development. Also, stock market variables seem to play an increasingly important role in predicting investment spending behaviour in recent times.

Suggested Citation

  • Renee van Eyden & Goodness C. Aye & Rangan Gupta, 2012. "Predictive Ability of Competing Models for South Africa’s Fixed Business Non- Residential Investment Spending," Working Papers 201229, University of Pretoria, Department of Economics.
  • Handle: RePEc:pre:wpaper:201229
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    business fixed investment spending; out-of-sample forecasts; mean squared forecast error; forecast encompassing;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

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