Econometric analysis of the impact of foreign direct investment on economic growth in Namibia: evidence from annual data

Abstract

The driving objective of the study was to measure in quantitative terms the influence of foreign direct investment on economic growth through cointegration techniques. Namibia was used as a case study. Annual dataset stretching from 1990 to 2014 was also applied. The imperative findings arising from the study constitutes the following: The study found long-run relationships among all the variables under consideration in the econometric model. The estimated long-run equation also indicates a positive association between the explanatory variables and real gross domestic product. In particular, net foreign direct capital was found to have a stronger influence on economic growth compared to openness and real foreign exchange rate. Correspondingly, a unidirectional relationship running from real exchange rate to net foreign direct investments was found. In addition, amongst the three explanatory variables used in the model, openness and net foreign direct investment contributed more towards innovations in economic growth during the forecast horizon compared to real exchange rate variable. The research paper concludes by creating opportunities for further investigations.