n Studies in Economics and Econometrics - Foreign direct investment in the agriculture sector of South Africa : do GDP and exports determine locational inflows?

Volume 34, Issue 2
  • ISSN : 0379-6205


This study investigates the causal link between agricultural foreign direct investment (FDI), agricultural exports, and agricultural gross domestic product (GDP) in South Africa for the period 1994 - 2006. The central goal of this paper is to answer the question of whether there exists any complementary relationships or not between the two sets of variables. The paper utilizes the Granger causality method and the error correction method (ECM), in a bivariate setting. The results show that while there is a bi-directional causality from FDI to exports, there is only one-way causality from GDP to FDI. Rather than FDI stimulating agricultural productivity, agricultural productivity stimulates FDI. Thus, an increase in agricultural productivity is envisaged to yield increased FDI in the agricultural sector of South Africa.

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