Modeling and Forecasting Foreign Direct Investment (FDI) into SAARC for the Period of 2013-2037 with ARIMA
Dr. Prasanna Perera

Abstract
This paper forecasts the value of FDI for SAARC for the period of 2013-2037. This study applies times series data from 1970 to 2012. The analysis indicates that both mean and the variance change with an increasing trend for the forecasting period. FDI data is stationary according to the Augmented Dickey-Fuller Test. The paper identifies minimum AIC value and presents ARIMA (1, 1, 5) and ARIMA (1, 0, 5) models as optimal models to forecast FDI in the region. Box-Ljung test is employed to illustrate the randomization of residuals. The total value of FDI expected for the next twenty five years (2013-2037) is US $ 1672895.18 million and average FDI expected for the next twenty five years is US $ 66915.81 million for SAARC. The total value of FDI for the period of 2013- 2023 is $671839.07 million and for the balance fifteen years (2024-2037), it is $ 1001056.11 million. The average FDI for the period 2013-2023 is $ 67183.91 million and for 2024-2037, it is $ 71504.01 million. There is a significant potential for enhancing regional co-operation in the area of direct investment, both for expanding intra-SAARC FDI, and for attracting FDI from outside the South Asian region. However, the role of FDI in economic integration is an issue that has received little attention in South Asia.

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