Causal relationship between FDI and poverty reduction in South Africa

Figures & data

Table 1. Variable definition

Variable	Description
Pov1	Household consumption expenditure per capita
Pov2	Infant mortality rate
Pov3	Life expectancy
FDI	Foreign direct investment inflows as a proportion of GDP
GDP	Real gross domestic product

Table 2. Unit root test result

DF-GLS test					PP test				PPU (root) test
Variable	Stationarity of variable in levels		Stationarity of variable in first difference		Stationarity of variable in levels		Stationarity of variable in first difference		Stationarity of all variables in levels		Stationarity of all variables in first difference
	Without trend	With trend	Without trend	With trend	Without trend	With trend	Without trend	With trend	Without trend	With trend	Without trend	With trend
Pov1	0.0553	−1.9904	−3.4348^***	−3.8536^***	0.6090	−1.0017	−3.5089**	−4.2448**	−3.9615	−4.1715	−4.9620*	−4.7309*
Pov2	−0.6196	−2.4142	−1.7115*	−3.4807**	−1.5984	−1.8477	−2.7283*	−6.0645***	−6.7140***	−6.5543***	-	-
Pov3	−3.7138***	−5.0544***	-	-	−3.2334***	−3.7126**	-	-	−6.4505****	−5.9918**	-	-
FDI	−4.1328***	−5.8740***	-	-	−4.2533***	−5.9719***	-	-	−5.2303**	−5.6444**	-	-
GDP	0.9090	−1.4383	−3.4211***	−4.1374***	2.1948	−0.9724	−3.5341***	−4.4367***	−3.4446	−3.6569	−5.4509**	−5.4217*

* Stationarity at 10% significance levels.

** Stationarity at 5% significance levels.

*** Stationarity at 1% significance levels.

Table 3. ARDL bounds test for cointegration results—Model 1–3

Dependent variable	Function		F-statistic		Cointegration status
Panel A: Model 1
Pov1	F(Pov1|FDI, GDP)		5.820**		Cointegrated
FDI	F(FDI|Pov1, GDP)		5.605**		Cointegrated
GDP	F(GDP|Pov1, FDI)		2.268		Not cointegrated
Panel B: Model 2
Pov2	F(Pov2|FDI, GDP)		1.808		Not cointegrated
FDI	F(FDI|Pov2, GDP)		7.400***		Cointegrated
GDP	F(GDP|Pov2, FDI)		1.087		Not cointegrated
Panel C: Model 3
Pov3	F(Pov3|FDI, GDP)		9.096***		Cointegrated
FDI	F(FDI|Pov3, GDP)		6.539***		Cointegrated
GDP	F(GDP|Pov3, FDI)		2.865		Not cointegrated
Asymptotic critical values (unrestricted intercept and no trend)
Pesaran et al. (2001, p. 300) critical values (Table CI (iii) Case III)	1%		5%		10%
	I(0)	I(1)	I(0)	I(1)	I(0)	I(1)
	5.15	6.36	3.79	4.85	3.17	4.14

* Stationarity at 10% significance levels.

** Stationarity at 5% significance levels.

*** Stationarity at 1% significance levels.

Table 4. ECM-based causality results

Dependent variable	F-statistics			ECM t-statistics
	ΔPov1	ΔFDI	ΔGDP
Panel A: Model 1
ΔPov1	–	1.095 (0.350)	5.946^***(0.008)	−0.180^**(−2.653)
ΔFDI	0.183 (0.673)	–	4.038^*(0.056)	−1.052^*** (−5.500)
ΔGDP	3.240^* (0.082)	0.390 (0.537)	–	–
Panel B: Mode1 2
ΔPov2	–	0.439 (0.513)	3.144^*(0.087)	–
ΔFDI	6.231^** (0.016)	–	0.007 (0.934)	−1.073^*** (5.758)
ΔGDP	3.661^* (0.067)	3.309^* (0.081)	–	–
Panel C : Model 3
ΔPov3	–	0.488 (0492)	3.790^* (0.064)	−0.066^*** (7.835)
ΔFDI	4.757^** (0.038)	–	3.696^* (0.065)	−1.104^*** (−6.013)
ΔGDP	4.761^** (0.040)	4.103^** (0.030)	–	–

^* Stationarity at 10% significance levels.

^** Stationarity at 5% significance levels.

^*** Stationarity at 1% significance levels.

Table 5. Summary of granger causality results

	Causality
	SR	LR
Model 1 (Pov1)	No causality	No causality
Model 2 (Pov2)	Pov2→FDI	Pov2→FDI
Model 3 (Pov3)	Pov3→FDI	Pov3→FDI

Notes: Pov1 = household consumption expenditure; Pov2 = infant mortality rate; Pov3 = life expectancy.

Pesaran, M. H., Shin, Y., & Smith, R. (2001). Bounds testing approaches to the analysis of level relationship. Journal of Applied Econometrics, 16, 174–189.

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