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Foreign direct investment inflows and economic growth in SADC countries : a panel data approach

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dc.contributor.advisor Odhiambo, Nicholas M.
dc.contributor.author Mahembe, Edmore
dc.date.accessioned 2014-10-28T06:16:13Z
dc.date.available 2014-10-28T06:16:13Z
dc.date.issued 2014-08
dc.identifier.citation Mahembe, Edmore (2014) Foreign direct investment inflows and economic growth in SADC countries : a panel data approach, University of South Africa, Pretoria, <http://hdl.handle.net/10500/14232> en
dc.identifier.uri http://hdl.handle.net/10500/14232
dc.description.abstract This dissertation examines the causal relationship between inward foreign direct investment (FDI) and economic growth (GDP) in SADC countries. The study investigates, within a panel data context, whether causation is short-term, long-term or both; and explores whether the causal relationship between the two variables differs according to income level. The study covered a panel of 15 SADC countries over the period 1980-2012. In order to assess whether the causal relationship between FDI inflows and economic growth is dependent on the level of income, the study divided the SADC countries into two groups, namely, the low-income and the middleincome countries. The study used the recently developed panel data analysis methods to examine this causal relationship. It adopted a three stage approach, which consists of panel unit root, panel cointegration and Granger causality to examine the dynamic causal relationship between the two variables. Panel unit root results show that both variables in the two SADC country groups were integrated of order one. Panel cointegration tests showed that the variables for low-income country group were not cointegrated, while the variables for the middle-income countries were cointegrated. Since the low-income country group panels were not cointegrated, Grangercausality tests were conducted within a VAR framework, while causality tests for the middleincome country group were conducted within an ECM framework. Panel Granger causality results for the low-income countries showed no evidence of causality in either direction. However, for the middle-income countries’ panel, there was evidence of a unidirectional causal flow from GDP to FDI in both the long- and short- run. The study concludes that the FDI-led growth hypothesis does not apply to SADC countries. The results imply that the recent high economic growth rates recorded in the SADC region, especially middle-income countries, have been attracting FDI. In other words, it is economic growth that drives FDI inflows into the SADC region, and not vice versa. These findings have profound policy implications for the SADC region at large and individual countries. en
dc.format.extent 1 online resource (x, 150 pages)
dc.language.iso en en
dc.subject Foreign direct investment en
dc.subject Economic growth en
dc.subject SADC en
dc.subject Error correction model (ECM) en
dc.subject Vector autoregressions (VAR) en
dc.subject Panel data en
dc.subject Granger causality en
dc.subject Unit root en
dc.subject Cointegration en
dc.subject.ddc 338.968
dc.subject.lcsh Investments, Foreign -- Africa, Southern -- Econometric models en
dc.subject.lcsh Economic development -- Africa, Southern -- Econometric models en
dc.subject.lcsh Southern African Development Community -- Commerce en
dc.subject.lcsh Panel analysis -- Econometric models en
dc.subject.lcsh Africa, Southern -- Economic conditions -- 21st century en
dc.title Foreign direct investment inflows and economic growth in SADC countries : a panel data approach en
dc.type Dissertation en
dc.description.department Economics en
dc.description.degree MCOM (Economics)


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