Export Led Growth and Foreign Direct Investment: The Zimbabwean Experience

Most developing countries that have embarked on structural adjustment have embraced export promotion strategies. In Zimbabwe's case, export promotion is coupled with attempts to increase flows of foreign capital. However, there is no universal agreement on the efficacy of such policies. The shift in policy, though, should not be viewed as a bandwagon effect as shown by results from this paper. The author employs a vector autoregression (VAR) to test for causation between GNP, exports and FDI. While some theoretical justification for adopting this methodology is provided, limitations of this study are also highlighted. It is concluded that causation between the variables cannot be rejected and that significantly strong feedback effects exist. As such, complementary policies need to be clearly designed if the desired economic turnaround is to be realised.