The effects of FDI shocks in South Africa: A global war approach

Abstract

This paper uses the global vector autoregressive (global VAR) model to analyze the foreign direct investment linkages between South Africa and the BRIC (Brazil, Russia, India, and China) countries over the period 1995Q1-2009Q4. It specifically evaluates the impact of output and outward FDI shock from the BRIC countries on South African inward and outward FDI. The results shows that the notable performances of the BRIC economies are not transmitted to the South African economy by FDI flows, but transmitted through the exchange rates from some countries and trade from the others.