Asymmetric Effects of Development Finance Institutions Funding (DFIs) on Investment in Zimbabwe: A Futuristic Perspective

Abstract

Introduction - This study aimed to explore the anticipated asymmetric effects of developmental finance institutions (DFIs) funding on investment in Zimbabwe. Given the volatile nature of development finance, Zimbabwe has faced challenges in effectively mobilizing aid, often struggling to persuade donors due to government spending plans and political factors. The research sought to investigate the potential asymmetrical linkages between DFIs funding and investment in Zimbabwe. Methodology: Model and Variables - To examine the futuristic asymmetric relationship between DFIs funding and investment in the Zimbabwean economy, a non-linear NARDL modelling approach will be employed. This methodology will estimate the projected non-linear co-integrating association between positive and negative shocks to DFIs funding and investment. The data set consisted of projected annual macroeconomic variables for Zimbabwe obtained from world bank and IMF. Results - In the short run, it was found that both positive and negative shocks influence future investment, with negative shocks expected to have a larger effect. These negative shocks arise from economic downturns or external shocks, while positive shocks could result from increased funding or favourable policy changes. In the long run, it was found that positive shocks to DFIs funding have a positive impact on investment, leading to increased economic growth and development. Conclusion and Recommendations - Based on the results, DFIs funding should exhibit an asymmetric relationship with investment in Zimbabwe. It is crucial for the government of Zimbabwe to proactively plan for these anticipated asymmetric effects and develop strategies to maximize the benefits of DFIs funding. By implementing the recommendations, Zimbabwe can be able to ensure a more favourable environment for future DFIs funding, fostering sustainable investment and economic growth.