Does economic policy uncertainty drive foreign direct <span lang="EN-GB">investment inflows? Evidence from South Africa

Foreign direct investment (FDI) is central to economic growth in emerging economies, yet the extent to which economic policy uncertainty (EPU) shapes FDI inflows in African contexts remains empirically underexplored, particularly using dynamic, direction-sensitive methods. This study examines the time-varying and directional relationship between EPU and FDI in South Africa using monthly data spanning January ۲۰۰۶ to December ۲۰۲۱, with FDI sourced from the World Bank and EPU proxied by the World Uncertainty Index. A time-varying parameter vector autoregression (TVP-VAR) connectedness framework is applied, complemented by the Maximal Overlap Discrete Wavelet Transformation (MODWT) across four time scales to test robustness over different investment horizons. Results show that overall connectedness between EPU and FDI is low (TCI = ۱.۱۵), yet a clear asymmetry emerges: EPU acts as a net transmitter of shocks while FDI functions as a net receiver, with spillovers intensifying during periods of instability. MODWT confirms that this negative influence strengthens over medium- to long-term horizons. By combining dynamic connectedness and multi-scale wavelet evidence, the study fills a gap in emerging-market literature and offers implications for fostering policy stability to sustain foreign investment inflows.

کلیدواژه ها:

Wavelet ، Foreign direct investment ، economic policy uncertainty ، South Africa