Does FDI Moderate the Role of Public R&D in Accelerating Agricultural Production in Africa?

The agriculture sector in Africa is a major employer, but production levels have fallen short of demand. To match future demand, public investment in research and development (R&D) is required. The purpose of this paper is to investigate how foreign direct investments (FDIs) moderate the effects of public R&D on Africa's agricultural production. This study estimates an unbalanced panel fixed effect model that consists of 28 African countries covering the period 1980-2014. Public R&D increases production in the agriculture sector, however, the effects reverse after ten years. Though FDIs have direct positive effects on production, indirectly, it reduces the productivity potential of public R&D due to the possible dependency syndrome associated with FDIs. Traditional inputs like land, capital, and labour and good political institutions positively drive production, but adverse changes in the weather reduce production. There should be a frequent update of R&D and improvement in maintenance culture. FDIs should be seen as complementary efforts, and not as substitute efforts to domestic investment efforts in R&D. Insufficient domestic investment has increased the dependence on FDIs. In this regard, FDIs effect on production could be tricky since it increases the volatility in agricultural R&D. This paper contributes to the literature by examining how FDIs moderate the effects of public R&D on output.authors use an NARX model. Mixed results were found; there is a bidirectional relationship between inflation and exchange rate among others. Results also show that there is a strong correlation between the terms of trade and inflation, which says that trade openness increases the demand for imported goods and, therefore, causes more inflation for Tunisia. After these results, it is important for policymakers to know which factors influence exchange rate stability, especially in developing countries like Tunisia.