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Foreign Direct Investment: South Africa’s Elixir of Life?

Author

Listed:
  • C.E. Moolman

    () (Department of Economics, University of Pretoria)

  • E.L. Roos

    (Department of Economics, University of Pretoria)

  • J.C. Le Roux

    (Department of Economics, University of Pretoria)

  • C. B. Du Toit

    () (Department of Economics, University of Pretoria)

Abstract

Foreign direct investment (FDI) has of late been revered as the solution to a great deal of the developing world’s problems. This paper seeks to examine the macroeconomic link between foreign direct investment in South Africa, and its resultant impact on potential output. Cointegration techniques and time-series data from 1970-2003 are utilized to construct a model suitable for policy analysis. Policy options, through which the level of foreign direct investment inflow can be raised, and its’ ultimate impact on output are investigated. Empirical results indicate that market size, openness, infrastructure and nominal exchange rate are factors on which South African policy makers should focus when seeking to attract foreign direct investment.

Suggested Citation

  • C.E. Moolman & E.L. Roos & J.C. Le Roux & C. B. Du Toit, 2006. "Foreign Direct Investment: South Africa’s Elixir of Life?," Working Papers 200605, University of Pretoria, Department of Economics.
  • Handle: RePEc:pre:wpaper:200605
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    File URL: http://www.up.ac.za/media/shared/61/WP/wp_2006_05.zp39544.pdf
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    References listed on IDEAS

    as
    1. Akinlo, A. Enisan, 2004. "Foreign direct investment and growth in Nigeria: An empirical investigation," Journal of Policy Modeling, Elsevier, vol. 26(5), pages 627-639, July.
    2. Bevan, Alan & Estrin, Saul & Meyer, Klaus, 2004. "Foreign investment location and institutional development in transition economies," International Business Review, Elsevier, vol. 13(1), pages 43-64, February.
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    Citations

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    Cited by:

    1. Valli, Mohammed & Masih, Mansur, 2014. "Is there any causality between inflation and FDI in an ‘inflation targeting’ regime? Evidence from South Africa," MPRA Paper 60246, University Library of Munich, Germany.
    2. Carike Claassen & Elsabé Loots & Henri Bezuidenhout, 2011. "Chinese Foreign Direct Investment in Africa," Working Papers 261, Economic Research Southern Africa.

    More about this item

    Keywords

    foreign direct investment; potential output; economic growth; macroeconomic model;

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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