The focus of this study is to investigate the extent to which FDI flowing in Mauritius reduces poverty
or increases welfare by using time series data for the period 1980-2013. This study methodologically
departs from the existing ones as it uses a dynamic vector autoregressive model that
ensures the dynamic behaviour of the time series under consideration is properly captured, while
simultaneously catering for endogeneity and causality issues. Any feedback and indirect effects
which might be present will also be detected within the VAR/VECM framework. The results show
that indeed FDI has contributed to poverty reduction; albeit the magnitude of the coefficient is
relatively smaller in the short run as compared to the long run. Also a uni-directional causality is
observed between FDI and poverty reduction. Furthermore, the results confirm the fact that FDI
reduces poverty through the employment channel. Other important factors contributing to a reduction
in poverty according to this study is an increase in government spending as well as trade
openness. Whereas, higher debt is observed to increase the level of poverty