Linkages between Foreign Direct Investment, Trade Openness and Economic Growth in South Africa: Does Exchange Rate Regime Choice Matter?
| Autor | Thobekile Qabhobho/Edmund Vincent Nyarko Amoah/Isaac Doku |
| Cargo | Nelson Mandela University/Nelson Mandela University/Departamento de Educación Económica, Universidad de Educación |
| Páginas | 59-86 |
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Latin American Journal of Trade Policy 13 (2022) - ISSN 079-9668 - Universidad de Chile
ABSTRACT
This paper investigates the linkages between FDI, trade
openness, and economic growth, and the role of exchange
rate regime choice. To achieve this objective, the study
used 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 ow 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
59
Linkages between foreign direct investment, trade
openness and economic growth in South Africa:
Does exchange rate regime choice matter?*
Thobekile Qabhobho**
Edmund Vincent Nyarko Amoah***
Isaac Doku****
This article is an expanded version of a dissertation entitled Foreign direct in-
vestment, trade openness and economic growth linkages: The role of exchange
rate regime choice in South Africa presented at Nelson Mandela University for
the Master of Commerce in Economics.
Corresponding author. Department of Economics, Nelson Mandela University,
South Africa. Email: Thobekile.Qabhobho@mandela.ac.za Received: Decem-
ber 1st, 2021; modications: August 23rd, 2022; Accepted: August 26th, 2022.
Department of Economics, Nelson Mandela University, South Africa. Email:
edmundvincento@gmail.com
Department of Economics Education, University of Education, Winneba-Gha-
na. Email: isaacoberkoh27@gmail.com
*
**
***
****
60
Latin American Journal of Trade Policy 13 (2022) - Universidad de Chile
ARDL with a known structural break for exchange rate
regime choice revealed that exchange rate had a signicant
positive impact on economic growth in the short-run,
whereas it had a signicant 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 oat exchange rate regime to a
free oat exchange rate regime caused a 1.49% increase
in economic growth. This may be interpreted as an indi-
cation that the free oat exchange rate is a better choice
compared to a managed oat exchange rate. To conclude,
the paper discusses policy implications and suggestions
to policymakers in South Africa.
Keywords: Economic growth – exchange rate regimes –
foreign direct investment – trade openness – South Africa.
RESUMEN
Este artículo analiza los vínculos entre la IED, la apertura
comercial y el crecimiento económico, y el papel de la
elección del régimen cambiario. Para lograr este objetivo,
el estudio utilizó un conjunto de datos secundarios para
el período 1995 - 2018 para Sudáfrica. El estudio empleó
la prueba de causalidad ARDL y Granger. Los resultados
no mostraron causalidad de Granger entre el PIB y la
IED. Se encontró una causal de Granger uni-direccional
del PIB a la apertura comercial y entre la IED al tipo de
cambio. Se estableció una causalidad bidireccional entre
PIB y tipo de cambio, y entre apertura comercial y tipo
de cambio. Se introdujo una prueba de cointegración de
Gregory-Hansen para manejar el concepto de cambios
de régimen en el análisis actual. Los hallazgos del ARDL
con una ruptura estructural conocida para la elección
del régimen cambiario revelaron que el tipo de cambio
tuvo un impacto positivo signicativo en el crecimiento
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