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

Tina Moolman (), Elizabeth Roos, J.C. Le Roux and Charlotte Du Toit ()
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Tina Moolman: Department of Economics, University of Pretoria
J.C. Le Roux: Department of Economics, University of Pretoria
Charlotte Du Toit: Department of Economics, University of Pretoria

No 200605, Working Papers from University of Pretoria, Department of Economics

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.

Keywords: foreign direct investment; potential output; economic growth; macroeconomic model (search for similar items in EconPapers)
JEL-codes: C5 C22 E22 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2006-02
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