THE IMPACT OF FOREIGN DIRECT INVESTMENT ON THE AGRICULTURAL SECTOR: THE CASE OF MALAWI (1990-2023)

Abstract

This study investigates the impact of Agricultural Foreign Direct Investment (AFDI) on Agricultural Gross Domestic Product (AGDP) in Malawi, utilizing an Autoregressive Distributed Lag (ARDL) model for analysis. The research spans the period from 1990 to 2023 and examines six key variables: AFDI, Agriculture Gross Fixed Capital Formation (GFCF), trade openness, population growth rate, inflation, and AGDP. The findings reveal that AFDI demonstrates a negative influence in the long run at the 10% significance level, with a 1% increase in AFDI associated with a decrease of 0.0419% in AGDP growth. Additionally, AGFCF is found to have a significant positive impact on AGDP, while trade openness shows a positive relationship in the long run. Population growth is positively correlated with AGDP growth, indicating potential market and labour supply expansion. Conversely, inflation negatively affects AGDP, highlighting the importance of macroeconomic stability. The study employs the Bounds test for co-integration to confirm long-term relationships among the variables, providing insights into their interconnectedness. The results underscore the need for targeted policies to enhance infrastructure, improve absorptive capacity, and stabilize inflation to maximize the benefits of AFDI on AGDP that foster sustainable agricultural sector growth in Malawi.