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The real exchange rate-foreign direct investment controversy in South Africa: an application of ARDL approach


Citation

Dahir, Ahmed Mohamed and Mahat, Fauziah and Amin Noordin, Bany Ariffin and Ab Razak, Nazrul Hisyam (2017) The real exchange rate-foreign direct investment controversy in South Africa: an application of ARDL approach. International Journal of Economics and Finance, 9 (11). pp. 207-217. ISSN 1916-971X; ESSN: 1916-9728

Abstract

This paper examines the relationship between real exchange rate and foreign direct investment. We apply autoregressive distributed lag (ARDL) bounds testing method to estimate short and long-run relationships between the series in South Africa over the period of 1987-2016. The results reveal long-run cointegration relationships among variables are confirmed, implying real exchange rate, domestic market size stimulate the foreign direct investment in the long run. Furthermore, there is significant Granger unidirectional causality foreign direct investment to real exchange rate in short and long run and from market size to trade openness in a short run. This finding further suggests that the exchange rate instability are likely to be substantially harmful to a positive effect of FDI and should be avoided in South Africa.


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Additional Metadata

Item Type: Article
Divisions: Faculty of Economics and Management
DOI Number: https://doi.org/10.5539/ijef.v9n11p207
Publisher: Canadian Center of Science and Education
Keywords: Foreign direct investment; ARDL model; Error correction model
Depositing User: Nabilah Mustapa
Date Deposited: 08 Jun 2018 00:25
Last Modified: 08 Jun 2018 00:25
Altmetrics: http://www.altmetric.com/details.php?domain=psasir.upm.edu.my&doi=10.5539/ijef.v9n11p207
URI: http://psasir.upm.edu.my/id/eprint/60600
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