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

More documents

Recommendations

Info

well to be able to face competition from their foreign counterparts as stipulated by De Mello (1996) before. The Mauritian government should work on a short term basis with expectations that the benefits will also flow on a longer time frame as purported by the VECM and ECT above. Hence, the interconnectedness of variables enable a compromise of incentives which the government can adopt in order to maintain its economic objectives of economic sustainability, investment promotion or still the level of international trade. The impulse response and variance decomposition analysis confirms to a large extent the above results suggesting some robust findings. 6. CONCLUSION AND RECOMMENDATIONS In the light of the above study, an overview of Mauritius as a platform of attractiveness towards FDI has been underlined with much emphasis placed on each of the quantitative factors affecting inward foreign direct investment through data and econometric analysis. The Johansen technique of cointegration has been used in a vector error correction model to examine data on foreign direct investment, gross domestic product, domestic investment, real exchange rate, productivity and openness over the period 1976 till 2009. In general, all the estimated parameter coefficients carry the expected signs and are statistically significant at the conventional five percentage level when testing for the existence of any type of relationship between variables. The most important findings however resided as the existence of long-run and short-run relationships as implied by the statistical significance of the coefficients of differenced explanatory variables and the lagged error correction term (ECT) respectively. Some demonstrated bidirectional causality, others unilateral or no causality at all in the short and longer run. These results can be of pretty importance to policy makers in Mauritius in order for them to take good decisions and follow a course of action to lead the Mauritian economy towards success. 26
From the findings and analysis, it is imperative to discuss the recommendations which can be brought about to the Mauritian economy in order for the country to lure more. As it is, the main implications came from are the surprising interconnectedness of domestic and foreign investment along with the relationship of productivity and FDI. These two areas have unfortunately never been the basis of foundation of any measures or incentives to make Mauritius a better platform. Thus, it would be thus interesting for the BOI to try to implement incentives which tend to promote foreign investment as increases will also induce domestic investment and such benefits will be more apparent in the long run which will finally uphold the economy as a whole. Concerning productivity, this area is still of exploratory stage. Since in the short run, productivity is said to encourage FDI, it would be interesting if this could be used to lure investors to the country in promising them to get better workers at cheaper costs. The problem of unemployment will also be catered for while increasing standard of living of people and decreasing poverty level. This convergence of macroeconomic objectives can be well achieved though the right proportion of FDI determinants. On a concluding note, an important area which the government should not neglect is trying to attract FDI from other economies which have never dealt with Mauritius before by implementing measures which will cater for the investment profile of the financier of the foreign market. This will bring the country to an international recognition and promote sectors such as the tourism industry or enhance communication in between economies. References Akinlo E, 2004. Foreign direct investment and growth in Nigeria: An empirical investigation, Journal of Policy Modeling 26 (2004) 627–639 27
Page 1 and 2: On the Determinants of Foreign Capi
Page 3 and 4: the theoretical framework and empir
Page 5 and 6: 3.1 MOTIVES BEHIND FDI Literature o
Page 7 and 8: Closely related, FDI can be taken a
Page 9 and 10: with the idea that inward FDI is a
Page 11 and 12: literature itself is ambiguous on t
Page 13 and 14: Investment. For the purpose of esti
Page 15 and 16: 0 100 200 300 400 FDI US 1970 1980
Page 17 and 18: Figure 5.3 Geographical distributio
Page 19 and 20: Dependent variable: LDFDI Table 5.4
Page 21 and 22: Inference from Multiple Regression
Page 23 and 24: LOPEN Yes 25.02 (0.0000) LINV No 2.
Page 25: ESTIMATION OF THE LONG RUN RELATION
Page 29 and 30: Dunning J D. 1981. Explaining the I
Page 31 and 32: Kravis I B, Lipsey R. 1982. Locatio
Page 33 and 34: SACTRA (Standing Advisory Committee

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

Create successful ePaper yourself

Delete template?

Save as template?