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. / Economics / MCOM (Economics)
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:unisa/oai:umkn-dsp01.int.unisa.ac.za:10500/14232 |
| Date | 08 1900 |
| Creators | Mahembe, Edmore |
| Contributors | Odhiambo, Nicholas M. |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Dissertation |
| Format | 1 online resource (x, 150 pages) |
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