Open AccessThe Causality between Foreign Direct Investment and Economic Growth in Botswana: A Multivariate Analysis
Author(s) -
Erasmus L. Owusu
Publication year - 2019
Publication title -
journal of economics, trade and marketing management
Language(s) - English
Resource type - Journals
eISSN - 2642-2417
pISSN - 2642-2409
DOI - 10.22158/jetmm.v1n1p8
Subject(s) - foreign direct investment , openness to experience , economics , inflow , granger causality , monetary economics , error correction model , investment (military) , causality (physics) , private sector , international economics , gross fixed capital formation , macroeconomics , cointegration , econometrics , economic growth , geography , physics , political science , law , psychology , social psychology , quantum mechanics , politics , meteorology
The paper empirically investigates the short and long-run causal relationship between foreign direct investment, credit to the private sector, trade openness, gross national expenditure and economic growth in Botswana. In doing this, the paper employs multivariate Granger-Causality within an ARDL-bounds approach to co-integration and unrestricted error correction model (UECM). The paper finds that FDI inflow does not spur economic growth but rather, it is economic growth which promotes FDI inflow, credit to the private sector, trade and national expenditure. However, the paper finds a bi-directional relationship between FDI inflow and credit to the private sector both in the short and the long runs. Thus, policies should be targeted at improving the investment climate for existing domestic and foreign investors through infrastructure development and that external capital inflow should be complemented by domestic savings and investors on other to boost economic growth in Botswana.