How does inward fdi affect a host country’s export performance? The case of Ethiopia

Abstract

This study is deemed to be significant in investigating the impact of Foreign Direct Investment on export performance of developing countries, particularly in Ethiopia. The analysis is made based on series of panel data available from the year 1980 – 2011. In order to differentiate the impact of independent variables, i.e. inward foreign direct investment capital, domestic investment capital, level of trade openness, and real effective exchange rate on the dependent variable, i.e. real exports, the researchers used explanatory research design with time series regression model which were used in the process of examining the effect of inward foreign direct investment on host country’s export performance. In order to check the fitness or degree of robustness of the model, different tests such as; test stationary, co-integration, model accuracy and other econometric problems like test for multicollinearity, heteroskedasticity, and autocorrelation were conducted. According to the findings of the study, the four independent variables included in this study have positive and significant effect on export performance.