Testing the Granger Causality of FDI Inward in Developing Economies: A Pair-Wise Study of America, Africa, and Asia

  • Azeem Ahmad Khan, Abdul Razzak Hashmi


The purpose of this paper is to test the causality of FDI inward in developing economies particularly to America, Africa, and Asia region as a whole. This study has used yearly FDI inward data of Africa, America, and Asia for the period ranging from 1970 to 2018. Empirical analysis has been carried out in order to assess whether there is causality exists among Africa, America and Asian region FDI inward flows by Granger Causality test.The result shows that the causality of FDI inward of America can be used to predict the growth of FDI Inward of Africa, FDI Inward of Asia can be used to forecast FDI Inward of Africa, and FDI Inward America can be used to estimate the FDI Inward flow of Asia. The causality between FDI Inward of Africa and America, FDI Inward of Africa and Asia and FDI Inward Asia and America does not show significant results by chosen lag2. The bi-directional causality or pair-wise causality has been found between the selected regions using different lag. The practical implications in the study to select best model depend upon the lag selection; when lag changes the result of granger causality test also changes a lot, it means that the lag selection affect the result. The originality of the study has become significant because no study has been examined the Granger causality test of FDI inward of America, Africa, and Asia altogether.