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Foreign Direct Investment and Trade in the Southern African Development Community

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Author Info
Bezuidenhout, Henri
Naude, Wim

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Abstract

We use a modified gravity model to estimate the relationship between trade and foreign direct investment (FDI) in the Southern African Development Community (SADC). We find evidence of a significant causal relationship from SADC?s exports to inward FDI. Distance (reflecting remoteness and transport costs) and political instability are confirmed to be significant determinants of FDI to SADC. We discern differences in the patterns and determinants of FDI to SADC, whether it is from the USA and UK or from continental Europe. In the case of FDI to SADC from the USA and UK, it is exports from SADC to these countries that are significant, and not imports, while, in the case of continental Europe, both exports and imports are significantly associated with FDI to SADC.

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Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Papers with number RP2008/88.

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Length: 20 pages
Date of creation: 2008
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Handle: RePEc:unu:wpaper:rp2008-88

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Keywords: FDI; SADC; South Africa; exports; gravity model;

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  22. Author-Name: Jeffrey D. Sachs & John W. McArthur & Guido Schmidt-Traub & Margaret Kruk & Chandrika Bahadur & Michael Faye & Gordon McCord, 2004. "Ending Africa's Poverty Trap," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 35(2004-1), pages 117-240. [Downloadable!]
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Henri Bezuidenhout, 2009. "A Regional Perspective on Aid and FDI in Southern Africa," International Advances in Economic Research, Springer, vol. 15(3), pages 310-321, August. [Downloadable!] (restricted)
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