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Foreign Direct Investment, Gross Capital Formation, Foreign Remittances, and Economic Growth in Zimbabwe

Author

Listed:
  • Maune Alexander

    (University of South Africa, South Africa; Bindura University of Science Education, Zimbabwe)

  • Matanda Ephraim

    (Great Zimbabwe University, Zimbabwe)

  • Chitombo Ezekiel

    (Bindura University of Science Education, Zimbabwe)

Abstract

Research background Capital investment financing has been cited as a critical element in economic growth the world over although there is no consensus regarding the significance, direction, and magnitude of the relationship. Purpose The article investigated the relationship between foreign direct investment, gross capital formation, personal remittances, and gross domestic product in Zimbabwe from 1960–2020. Research methodology The random effects model was used to examine this relationship using data collected from the World Development Indicators database. The random effects model was selected after performing the Hausman test. Results All the regression coefficients of the country’s gross domestic product reveal a direct or positive relationship with the three independent variables. Furthermore, the study reveals that gross capital formation had the highest contribution to Zimbabwe’s gross domestic product compared to that of foreign direct investment and personal remittances for the period under study. The coefficients of determination of the independent variables were significant. In other words, foreign direct investment accounted for 57.24%, gross capital formation 68.47%, and personal remittances 48.76% to foreign direct investment for the same period. Novelty The article closed the gap in knowledge by drawing attention to the relationship between foreign direct investment, gross capital formation, personal remittances, and gross domestic product in Zimbabwe.

Suggested Citation

  • Maune Alexander & Matanda Ephraim & Chitombo Ezekiel, 2023. "Foreign Direct Investment, Gross Capital Formation, Foreign Remittances, and Economic Growth in Zimbabwe," Folia Oeconomica Stetinensia, Sciendo, vol. 23(2), pages 261-274, December.
    • Handle: RePEc:vrs:foeste:v:23:y:2023:i:2:p:261-274:n:9
    DOI: 10.2478/foli-2023-0030
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    References listed on IDEAS

    as
    1. Imad A. Moosa, 2002. "Theories of Foreign Direct Investment," Palgrave Macmillan Books, in: Foreign Direct Investment, chapter 2, pages 23-67, Palgrave Macmillan.
    2. Christopher F Baum, 2006. "An Introduction to Modern Econometrics using Stata," Stata Press books, StataCorp LLC, number imeus, December.
    3. Alexander Maune, 2015. "Corporate Governance in Zimbabwe: An Overview of Its Current State," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(1), pages 167-178.
    4. Adams, Samuel, 2009. "Foreign Direct investment, domestic investment, and economic growth in Sub-Saharan Africa," Journal of Policy Modeling, Elsevier, vol. 31(6), pages 939-949, November.
    5. Clarke, Paul & Crawford, Claire & Steele, Fiona & Vignoles, Anna, 2010. "The Choice Between Fixed and Random Effects Models: Some Considerations for Educational Research," IZA Discussion Papers 5287, Institute of Labor Economics (IZA).
    6. Havranek, Tomas & Irsova, Zuzana, 2011. "Estimating vertical spillovers from FDI: Why results vary and what the true effect is," Journal of International Economics, Elsevier, vol. 85(2), pages 234-244.
    7. Imad A. Moosa, 2002. "The Effects of Foreign Direct Investment," Palgrave Macmillan Books, in: Foreign Direct Investment, chapter 3, pages 68-101, Palgrave Macmillan.
    8. Alexander Maune, 2015. "Corporate Governance in Zimbabwe: An Overview of Its Current State," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(1), pages 167-178, January.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Gross Capital Formation; Economic Growth; Domestic Investment; Foreign Remittances; Personal Remittances; Diaspora Remittances; Zimbabwe;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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