Linkages between Foreign Direct Investment, Trade Openness and Economic Growth in South Africa: Does Exchange Rate Regime Choice Matter?

This paper investigates the linkages between FDI, tradeopenness, and economic growth, and the role of exchangerate regime choice. To achieve this objective, the studyused a secondary data set for the period 1995 - 2018 for South Africa. The study employed the ARDL and Granger causality test. The res...

Full description

Saved in:
Bibliographic Details
Main Authors: Qabhobho, Thobekile, Nyarko Amoah, Edmund Vincent, Doku, Isaac
Format: Article
Language:English
Published: 2022
Subjects:
Economic growth
Exchange rate regimes
Foreign direct investment
Trade openness
Online Access:https://dialnet.unirioja.es/servlet/oaiart?codigo=8630674
Source:Latin American Journal of Trade Policy, ISSN 0719-9368, Vol. 5, Nº. 13, 2022 (Ejemplar dedicado a: Latin American Journal of Trade Policy), pags. 59-86
Tags: Add Tag
No Tags: Be the first to tag this record
Linkages between Foreign Direct Investment, Trade Openness and Economic Growth in South Africa: Does Exchange Rate Regime Choice Matter?
id
dialnet-ar-18-ART0001551788
record_format
dialnet
spelling
dialnet-ar-18-ART00015517882022-10-29Linkages between Foreign Direct Investment, Trade Openness and Economic Growth in South Africa: Does Exchange Rate Regime Choice Matter?Qabhobho, ThobekileNyarko Amoah, Edmund VincentDoku, IsaacEconomic growthExchange rate regimesForeign direct investmentTrade opennessThis paper investigates the linkages between FDI, tradeopenness, and economic growth, and the role of exchangerate regime choice. To achieve this objective, the studyused a secondary data set for the period 1995 - 2018 for South Africa. The study employed the ARDL and Granger causality test. The results showed no Granger causality between GDP and FDI. Uni-directional Granger causality was found to flow from GDP to trade openness and FDI to exchange rate. A bi-directional causality was established between GDP and exchange rate, and between trade openness and exchange rate. A Gregory-Hansen cointegration test was introduced to handle the concept of regime changes in the current study. Findings from the ARDL with a known structural break for exchange rate regime choice revealed that exchange rate had a significant positive impact on economic growth in the short-run, whereas it had a significant negative impact on economic growth in the long-run. This implies that, during the initial stages of an exchange rate policy, the South African rand appreciated, leading to a boost in economic growth. A change from managed float exchange rate regime to a free float exchange rate regime caused a 1.49% increase in economic growth. This may be interpreted as an indication that the free float exchange rate is a better choice compared to a managed float exchange rate. To conclude, the paper discusses policy implications and suggestions to policymakers in South Africa.2022text (article)application/pdfhttps://dialnet.unirioja.es/servlet/oaiart?codigo=8630674(Revista) ISSN 0719-9368Latin American Journal of Trade Policy, ISSN 0719-9368, Vol. 5, Nº. 13, 2022 (Ejemplar dedicado a: Latin American Journal of Trade Policy), pags. 59-86engLICENCIA DE USO: Los documentos a texto completo incluidos en Dialnet son de acceso libre y propiedad de sus autores y/o editores. Por tanto, cualquier acto de reproducción, distribución, comunicación pública y/o transformación total o parcial requiere el consentimiento expreso y escrito de aquéllos. Cualquier enlace al texto completo de estos documentos deberá hacerse a través de la URL oficial de éstos en Dialnet. Más información: https://dialnet.unirioja.es/info/derechosOAI | INTELLECTUAL PROPERTY RIGHTS STATEMENT: Full text documents hosted by Dialnet are protected by copyright and/or related rights. This digital object is accessible without charge, but its use is subject to the licensing conditions set by its authors or editors. Unless expressly stated otherwise in the licensing conditions, you are free to linking, browsing, printing and making a copy for your own personal purposes. All other acts of reproduction and communication to the public are subject to the licensing conditions expressed by editors and authors and require consent from them. Any link to this document should be made using its official URL in Dialnet. More info: https://dialnet.unirioja.es/info/derechosOAI
institution
Dialnet
collection
Dialnet AR
source
Latin American Journal of Trade Policy, ISSN 0719-9368, Vol. 5, Nº. 13, 2022 (Ejemplar dedicado a: Latin American Journal of Trade Policy), pags. 59-86
language
English
topic
Economic growth
Exchange rate regimes
Foreign direct investment
Trade openness
spellingShingle
Economic growth
Exchange rate regimes
Foreign direct investment
Trade openness
Qabhobho, Thobekile
Nyarko Amoah, Edmund Vincent
Doku, Isaac
Linkages between Foreign Direct Investment, Trade Openness and Economic Growth in South Africa: Does Exchange Rate Regime Choice Matter?
description
This paper investigates the linkages between FDI, tradeopenness, and economic growth, and the role of exchangerate regime choice. To achieve this objective, the studyused a secondary data set for the period 1995 - 2018 for South Africa. The study employed the ARDL and Granger causality test. The results showed no Granger causality between GDP and FDI. Uni-directional Granger causality was found to flow from GDP to trade openness and FDI to exchange rate. A bi-directional causality was established between GDP and exchange rate, and between trade openness and exchange rate. A Gregory-Hansen cointegration test was introduced to handle the concept of regime changes in the current study. Findings from the ARDL with a known structural break for exchange rate regime choice revealed that exchange rate had a significant positive impact on economic growth in the short-run, whereas it had a significant negative impact on economic growth in the long-run. This implies that, during the initial stages of an exchange rate policy, the South African rand appreciated, leading to a boost in economic growth. A change from managed float exchange rate regime to a free float exchange rate regime caused a 1.49% increase in economic growth. This may be interpreted as an indication that the free float exchange rate is a better choice compared to a managed float exchange rate. To conclude, the paper discusses policy implications and suggestions to policymakers in South Africa.
format
Article
author
Qabhobho, Thobekile
Nyarko Amoah, Edmund Vincent
Doku, Isaac
author_facet
Qabhobho, Thobekile
Nyarko Amoah, Edmund Vincent
Doku, Isaac
author_sort
Qabhobho, Thobekile
title
Linkages between Foreign Direct Investment, Trade Openness and Economic Growth in South Africa: Does Exchange Rate Regime Choice Matter?
title_short
Linkages between Foreign Direct Investment, Trade Openness and Economic Growth in South Africa: Does Exchange Rate Regime Choice Matter?
title_full
Linkages between Foreign Direct Investment, Trade Openness and Economic Growth in South Africa: Does Exchange Rate Regime Choice Matter?
title_fullStr
Linkages between Foreign Direct Investment, Trade Openness and Economic Growth in South Africa: Does Exchange Rate Regime Choice Matter?
title_full_unstemmed
Linkages between Foreign Direct Investment, Trade Openness and Economic Growth in South Africa: Does Exchange Rate Regime Choice Matter?
title_sort
linkages between foreign direct investment, trade openness and economic growth in south africa: does exchange rate regime choice matter?
publishDate
2022
url
https://dialnet.unirioja.es/servlet/oaiart?codigo=8630674
_version_
1748573214717509632

Similar Items