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FORECASTING FDI EQUITY INCOME FOR THE DANISH BALANCE OF PAYMENTS
Author(s) -
DAMGAARD JANNICK,
LAURSEN MATHIES LAU FRIIS,
WEDERKINCK ROBERT
Publication year - 2011
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/j.1475-4991.2011.00439.x
Subject(s) - economics , equity (law) , balance of payments , profitability index , foreign direct investment , danish , net income , monetary economics , econometrics , macroeconomics , finance , linguistics , philosophy , political science , law
Late and significant revisions are often observed in FDI equity income in many countries, hampering the quality of preliminary balance of payments statistics. We test a range of models on Danish data and find that forecasts for FDI equity income based on a combination of past profitability and consensus data for changes in expected private consumption growth outperform forecasts solely based on historical profitability. When the refined models are applied to the Danish balance of payments, the largest improvements are observed for outward and inward FDI separately. Revisions of net FDI equity income only decrease marginally because the significant revisions in gross terms resulting from the historical models have a tendency to (partly) cancel out each other on a net basis.