Abstract
Authors: Bogdan A. Moskalenko, ORCID: https://orcid.org/0000-0003-3972-1705 Joint stock company “ProCredit Bank”, Business Client Advisor, Kyiv, Ukraine Pavlin Mitev, ORCID: https://orcid.org/0000-0001-5798-4192 Joint stock company “Raiffeisenbank EAD”, Credit Risk Policy Manager, Bulgaria Pages: 95-101 Language: English DOI: https://doi.org/10.21272/fmir.4(3).95-101.2020 Download: Views: Downloads: 26 7 Abstract The article summarizes the arguments within the scientific challenge on improving approaches to country investment potential evaluation. The main objective of the research is to systematize the existing statistical methods of decomposing macroeconomic time series into growth (trend) and cyclical components. Systematization of theoretical and methodological materials on solving the problem of decomposing the trend and cyclical components of time data series showed that the use of filtering series of economic dynamics based on the Hodrick-Prescott filter allows identifying long-term growth trends or recessions. The relevance of solving this problem is that the country investment potential evaluation is often based on investigating the impact of foreign direct investment`s determinants in a domestic economy while ignoring cyclical macroeconomic processes within and outside the country, on which those determinants often have not responded yet or reacted late. The methodical tools of the research are carried out in the following logical sequence: systematization of existing statistical methods for trend component decomposing; analysis of data that will be used in the decomposition process and in further country investment potential evaluation; application of the Hodrick-Prescott filter and trend component decomposing in foreign direct investment net inflows dynamics into the economy of Ukraine. The Research methods combine in following dimensions: comparative analysis, regression analysis and univariate methodology of time series decomposing. The period from 1999 to 2019 was chosen as the research period. The object of the research is foreign direct investment net inflows into the economy of Ukraine, as they are the determining element within the country investment potential evaluation process. The article presents the results of empirical analysis, which showed that the decomposing a trend and cyclical components of foreign direct investment inflows can improve the quality of investment potential evaluation, considering the impact of current economic cycle phase. The results of the research can be useful for a more accurate investment potential evaluation on the macroeconomic level and forecasting foreign direct investment inflows for the following time periods. Keywords: business cycle synchronization; country investment potential; foreign direct investment; Hodrick-Prescott filter; national economy.
Highlights
Potential foreign direct investment (FDI) inflows could be defined as the maximum level of FDI inflows which is affordable without tensions in the economy: creating by government artificial conditions for FDI inflows via fiscal policy tools, more precisely without fiscal dumping
The potential FDI inflow is a function of macroeconomic indicators, and the FDI inflow gap is an insufficiency of FDI supply on national economy investment projects
Multivariate methods includes structural relationships such as Phillips curve, the Okun's Law and the NAIRU hypothesis, it makes possible to envisage time varying weights of smoothing parameter that reflects the change of importance level in the estimation period (Chagny and Döpke, 2001) converts time series into random walk and transitory components. shock driving this trend is supposed to be a linear combinaison of innovations of GDP and other variables which contains useful information to determine long term GDP. (Murasawa, 2015) makes it possible to give some indication of the uncertainty associated with the estimated output gap
Summary
Potential foreign direct investment (FDI) inflows could be defined as the maximum level of FDI inflows which is affordable without tensions in the economy: creating by government artificial conditions for FDI inflows via fiscal policy tools, more precisely without fiscal dumping. The FDI inflows gap is the difference between current level of FDI inflows and its considered (potential) level. The potential FDI inflow is a function of macroeconomic indicators, and the FDI inflow gap is an insufficiency of FDI supply on national economy investment projects. Positive FDI inflow gap means FDI inflows above potential expectations, and negative one indicates insufficient utilization of country investment attractiveness. Potential output and output gap concepts are connected mostly to GDP and GDP-related indexes. Cyclical component of GDP dynamic is highly correlated to that of FDI one in the scale of same national economy, which could be proved by comparison respective graphs on one chart
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