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Trade Liberalization And Foreign Investment In Africa — A Cointegration Analysis

Author

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  • RAJARSHI MITRA

    (Faculty of Economics 305, Kyushu University, 6-19-1 Hakozaki, Higashi-ku, Fukuoka 812-8581, Japan)

Abstract

This paper investigates the impact of trade openness on FDI inflows into Congo, Malawi and Swaziland. The paper identifies cointegrating relationships between trade openness and FDI inflows, amongst other determinants, for the three African economies. The Johansen cointegration test indicates a significantly positive impact of trade openness on FDI inflows into Congo and Swaziland. The impact is, however, significantly negative for Malawi. Granger causality test indicates lack of any causal effect between trade openness and FDI inflows. For all three African economies, greater participation in international trade when complemented with government expenditures and domestic investment will expectedly increase FDI inflows.

Suggested Citation

  • Rajarshi Mitra, 2012. "Trade Liberalization And Foreign Investment In Africa — A Cointegration Analysis," Global Journal of Economics (GJE), World Scientific Publishing Co. Pte. Ltd., vol. 1(02), pages 1-11.
    • Handle: RePEc:wsi:gjexxx:v:01:y:2012:i:02:n:s2251361212500140
    DOI: 10.1142/S2251361212500140
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    More about this item

    Keywords

    VECM; Cointegration; Granger causality; F21; F34; F42;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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