Ombeswa Ralarala

By Ombeswa Ralarala and Thobeka Ncanywa

Monetary variables are not only important for the attainment of stable inflation but also for exercising influences in various ways on the behavior of the real economy, including the level of investment activity. Investment is very crucial in improving a country’s productivity and growth and increasing its competitiveness in the long run. The study aims to investigate how monetary variables such as lending rates, exchange rate, and money supply affect investment actions in some selected Sub-Saharan African countries in the period 1980–2018. Using the panel autoregressive distributive lag method in the long run, a negative and significant relationship between lending rates and investment was discovered. Also, investment is positively related to both money supply and exchange rate in the long run. It is recommended that when central banks take contractionary measures, they must always consider the resulting change in investment as it is an essential part of aggregate demand. In a sluggish economy, interest rates should not be raised to the point where investment is discouraged and assets are suppressed.

Part of the book: Linear and Non-Linear Financial Econometrics

By Ombeswa Ralarala and Masenkane Happiness Makwala

Foreign direct divestment can occur for either external or internal factors. The determinants of FDI are also the same determinants for FDD. FDD might lead to numerous negative economic factors such as a decline in economic development, reduction in employment and might also cripple the facilitation in technology transfers. In this paper, the FDD concept in the Sub-Saharan African countries was investigated using annual data spanning from 1998 to 2018. The panel autoregressive distributive lag was used to develop the FDD model. The findings of the panel ARDL long run equation revealed that lending rates and urbanisation have a negative and significant influence on foreign direct investment. Further, the findings revealed an insignificant influence of real gross domestic product per capita on FDI. Finally, trade openness showed a positive significant impact on foreign direct investment. We recommend policies that increase FDI through the cost of borrowing since increasing this results in foreign direct divestment. Real gross domestic product per capita cannot be used for policy making purposes in the study. Trade openness makes a country more accessible on the world market and thus, policies that promote foreign trade such as exporting complex and sophisticated products, trade liberalisation, free trade agreements and open trade systems could help reduce the presence of foreign direct divestment in the selected countries. Finally, urbanisation deter foreign direct investment, therefore countries should invest more on infrastructure and reduce poverty in rural areas to transform them into urban areas to decrease urbanisation.

Part of the book: Macroeconomic Analysis for Economic Growth