THE IMPACT OF SELECTED MACROECONOMIC VARIABLES ON FOREIGN DIRECT INVESTMENT IN ZIMBABWE

Abstract

The paper attempts to examine the impact of the exchange rate, inflation rate and GDP on Foreign Direct Investment inflows in Zimbabwe. Secondary data for these macroeconomic variables were collected from Word Bank and ZIMSTATS covering a period of 38 years from 1980 to 2018. To examine the long-run relationship between foreign direct investment and the macroeconomic variables the Johansen Cointegration test and VECM was used in this paper. The findings reveal that GDP, Exchange rate and Inflation have no effect on FDI inflows in Zimbabwe and that other factors not included in the study could have impacted inflows of FDI. The study recommended that the government should implement policies that boost productivity and as well as to reduce inflation levels in the economy. We also recommended the use of fixed exchange rates to attract FDI.