GDP, FDI, and exports in East and Central African countries: a causality analysis

Pendo Kivyiro and Heli Arminen

International Journal of Business Innovation and Research, 2015, vol. 9, issue 3, 329-350

Abstract: This study examines Granger causality among gross domestic product (GDP), foreign direct investment (FDI), and exports in seven East and Central African countries using time series and panel data from 1989 to 2011. We employ a vector error correction model to examine the interrelationship among the variables for Tanzania, while we employ a vector autoregressive model for the other countries. The findings suggest unidirectional causality from exports to GDP in Burundi, Tanzania and Uganda. The results also indicate causality from FDI to GDP in Rwanda, Tanzania and Uganda, while GDP appears to Granger-cause FDI in Rwanda and Tanzania. Furthermore, FDI Granger-causes exports in Uganda, while exports Granger-cause FDI in Rwanda. The results also show that GDP Granger-causes exports in the Democratic Republic of the Congo. Bidirectional causality is only observed between FDI and GDP in Rwanda and Tanzania. The results from the panel data analysis indicate that there is bidirectional causality between FDI and exports and unidirectional causality from exports and FDI to GDP.

Keywords: gross domestic product; GDP; foreign direct investment; FDI; exports; Granger causality; East Africa; Central Africa; vector error correction; VEC; vector autoregression; VAR; Burundi; Rwanda; Tanzania; Uganda; Rwanda; DRC; Democratic Republic of the Congo; Kenya; exporting. (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijbire:v:9:y:2015:i:3:p:329-350

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