Testing the long-run relationship between exchange rate, oil price, FDI and GDP: an ARDL approach

Ziyaat Isaacs and Abul Masih

MPRA Paper from University Library of Munich, Germany

Abstract: This paper tests the relationship between exchange rate, oil price, FDI and GDP. South Africa, an energy dependent small open economy with a floating exchange rate is used as a case study using the Autoregressive Distributed Lag (ARDL) approach. The empirical results reveal that there are both long and short run relationship between exchange rate, oil price, GDP and FDI which are bilateral in nature. Since foreign investment can help promote economic growth, the findings tend to suggest that South Africa should make a concerted effort in devising polices that improve the level of FDI. In other words, they should provide more investment friendly climate for trade and efficient monetary policy since exchange rates and oil prices are evidenced to be the key determinants in attracting foreign direct investments.

Keywords: Exchange rate; oil price; FDI; GDP; ARDL; South Africa (search for similar items in EconPapers)
JEL-codes: C22 C58 G15 (search for similar items in EconPapers)
Date: 2017-02-28
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:109279

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