An ARCH volatility analysis of real GDP, real gross capital formation, and foreign direct investment in Bangladesh

Asian Economic and Financial Review

article

Moumita Datta Gupta¹  Md Mahfuzur Rahman¹  Zinat Sultana²  F M Arifur Rahman³ 

[1]Department of Mathematics and Natural Sciences, School of Data and Sciences, BRAC University

[2]Green Business School, Green University of Bangladesh

[3]Department of Mathematical & Physical Sciences, East West University

关键词: ARCH;    Economic growth;    Net inflows;    Return;    Risk;    Time series;    Volatility;    World bank indicators.;   

DOI  :  10.55493/5002.v13i4.4763

学科分类：社会科学、人文和艺术（综合）

来源: Asian Economic and Social Society

【 摘 要 】

This paper aims to investigate the volatility of the growth rates of Bangladesh's real GDP, real gross capital formation, and net inflows of foreign direct investment. The study used data on these indicators from the World Bank for the period between 1972 and 2020. Autoregressive integrated moving average (ARIMA) and the autoregressive conditional heteroscedastic (ARCH) methods were applied to model the conditional mean and conditional variance components for each growth rate. The validity of the selected volatility models was evaluated using a variety of diagnostic techniques, such as the time series graph of estimated residuals, cumulative periodogram, and the portmanteau test for white noise. The overall performance of the selected models is evaluated using the mean squared error (MSE) and the root mean squared error (RMSE). For all three indicators, the conditional means depend on the growth rates of the previous year or two years, whereas conditional variances depend on the previous year’s rates. The outcomes of the study also indicate the existence of time-varying volatility in Bangladesh's economy. This study may be helpful in understanding the potential risks related to the volatile nature of macroeconomic growth rates.

【 授权许可】

CC BY