On the Determinants of Foreign Capital Flows - DAAD partnership ...

Below is the summary statistics for the logarithmic form of the variables in the model. 7
Table 5.2 Summary statistics of variables
Variable Mean Std. Dev. Min Max
LFDI 16.58686 1.711117 13.41712 19.76725
LGDP 7.852768 .9124908 6.04834 9.388511
LOPEN .2495567 .1863881 -.0833816 .5247285
LINV 6.476609 .8007153 5.236655 7.739868
LPRO 4.249344 .4749508 2.99072 4.865224
LRER 2.801668 .5136263 1.818564 3.460095
By these preliminary data, it is very difficult to pronounce oneself on the relationship of FDI
and its determinants.
Unit Root Test and Order of Integration
Using the Augmented Dickey Fuller and Phillip Perron tests, we could not reject the null
hypothesis at 1%, 5% or 10% critical level suggesting that the variables are not stationary.
Hence, their first differenced form was then subjected to the same ADF test and with the test
statistic being greater than the critical levels in absolute terms, all variables were stationary
with Ho being rejected for H1. This also suggested that FDI and its determinants are all
integrated of order 1.
Since all of our variables are integrated of the same order, a VAR model can be used to test
for the regression as well as for the causality presented afterwards. The following regression
equation will now be used with variables at their first level differenced form:
LDFDIt = β0 + β1LDGDPt + β2LDOPENt + β3LDINVt + β4LDPROt + β5LDRERt + εt Equ 7
Regression Results
Hence, it is better to look at the regression results which are presented next:
7
All the variables being always positive for the case of Mauritius over the period of study was not a concern
when converted into logarithm.
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