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Saka, N and Lowe, J (2010) An assessment of comovement between foreign direct investment (FDI) and South African construction sector (SACS) output. In: Egbu, C (Ed.), Proceedings 26th Annual ARCOM Conference, 6-8 September 2010, Leeds, UK. Association of Researchers in Construction Management, Vol. 1, 83–92.

  • Type: Conference Proceedings
  • Keywords: econometrics; foreign direct investment; gross domestic product; South Africa
  • ISBN/ISSN: 978-0-9552390-4-5
  • URL: http://www.arcom.ac.uk/-docs/proceedings/ar2010-0083-0092_Saka_and_Lowe.pdf
  • Abstract:
    Proponents of open account contend that Foreign Direct Investment (FDI) promotes the growth of infrastructure through positive externalities. However empirical evidence on whether FDI promote growth in developing countries remains inconclusive. This paper investigates the comovement between FDI, the South African Construction Sector (SACS) output and the Gross Domestic Product (GDP). The data on FDI, SACS and GDP were extracted from the UNCTAD data base for the years 1970 through 2008. The study used econometric methodology including unit root test, Johansen cointegration and Granger causality tests to analyse the data. The result indicates that FDI, SACS, and GDP are stationary after first difference. Johansen cointegration test finds a long term contemporaneous relationship between FDI and SACS. Though FDI does not Granger cause SACS. However, FDG (FDI/GDP ratio) Granger causes SACG (SACS/GDP ratio) after a considerable lags. The paper concludes that the lack of causality between FDI and SACS is because South Africa was only recently readmitted into the global economy and that there are potentials for increase FDI impact on SACS.