Original Research

Foreign direct investment, trade openness and growth nexus in Lesotho

Leseko Makhetha, Joel Rantaoleng
Journal of Economic and Financial Sciences | Vol 10, No 1 | a10 | DOI: https://doi.org/10.4102/jef.v10i1.10 | © 2017 Leseko Makhetha, Joel Rantaoleng | This work is licensed under CC Attribution 4.0
Submitted: 06 December 2017 | Published: 06 June 2017

About the author(s)

Leseko Makhetha, National University of Lesotho, South Africa
Joel Rantaoleng, Lesotho Post Bank, South Africa

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Abstract

This paper examines the long-run relationship among FDI, trade openness and growth in Lesotho for the period 1980-2011. The results show a long-run relationship between output, FDI and trade openness. The VAR Granger causality shows a unidirectional causal relationship running from trade openness, FDI to output and from output, FDI to trade openness. FDI was found to be insignificant in explaining growth of output in both the long and short run. Trade openness was found to be significant with a negative impact on output growth in the long run but was found to be insignificant in the short run.

Keywords

Lesotho; FDI; Trade Openness; ARDL cointegration; VAR Granger causality/Block; Exogeneity Wald tests

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