International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss

The Impact of Foreign Direct Investment FDI and Real GDP on Current Account: Empirical Evidence from Sudan 1972-2011
Ahmed Mohammed Khater Arabi

This study aims to explain the relationship between foreign direct investment and current account of Sudan during the period 1972-2011 using the Johansen-Juselius co integration technique. The study used an econometric time series Vector Error Correction Model (VECM) approach in order to evaluate the short-run and long run impact of FDI and RGDP on current account. Impulse Response Function (IRF) has also been generated to explain the response to shock amongst the variables. The most important results of this study indicated that, foreign direct investment has a weak negative effect on the current account, Furthermore the results indicate that FDI and CA are co integrated and thus exhibits a reliable long run relationship. Therefore, as a policy implication that FDI inflows may cause to the deterioration of the balance of payments in the long run should be taken into account when policy makers decide to implement policies to attract foreign investors.

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