Trade Liberalism-Capital Inflow: An Inclusive Framework for Zimbabwe

Abstract

This study sought to determine a framework of upholding trade liberalism for increased capital inflows in the form of Foreign Direct Investment (FDI) for Zimbabwe.  The study used the ARDL-ECM in the determination of the nexus between the two variables, for the data covering 1980 to 2021. Eviews Version 9.0 Statistical Package was used to run the regressions. Data were obtained from the Reserve Bank of Zimbabwe, International Monetary Fund and World Bank. The study found that in the short-run, trade openness has a significant inverse relationship with capital flows (FDI), whilst in the long-run there is a significant positive relationship between them for Zimbabwe. The study recommend that there be duty free on capital goods, that the government give incentives on exporters, that all goods exported go through the process of value addition, that the government provide subsidies on exporters and, that the government ensure efficiency at ports through infrastructure development.