Does foreign direct investment spur economic growth? New empirical evidence from sub-Saharan African countries
In this study we re-examine the relationship between foreign direct investment (FDI) and economic growth in 27 sub-Saharan African (SSA) countries during the period 1990-2019. Unlike some previous studies, we clustered SSA countries into two groups, namely low-income and middle-income co...
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| Format: | Article |
| Language: | English |
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Faculty of Economics, Belgrade
2022-01-01
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| Series: | Ekonomski Anali |
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| Online Access: | http://www.doiserbia.nb.rs/img/doi/0013-3264/2022/0013-32642233061O.pdf |
| Summary: | In this study we re-examine the relationship between foreign direct
investment (FDI) and economic growth in 27 sub-Saharan African (SSA)
countries during the period 1990-2019. Unlike some previous studies, we
clustered SSA countries into two groups, namely low-income and middle-income
countries. We also employed three panel data techniques in a stepwise
fashion, namely the dynamic ordinary least squares (DOLS), the fully
modified ordinary least squares (FMOLS), and heterogeneous Granger
non-causality approaches. Our results show that while the positive impact of
FDI on economic growth is supported by both DOLS and FMOLS techniques in
low-income countries, in middle-income countries only the DOLS technique
supports this finding. This shows that the impact of FDI may be sensitive to
the level of income of the recipient country. Overall, the results show that
FDI inflows play a larger role in stimulating economic growth in low-income
SSA countries than in middle-income SSA countries. These findings are also
corroborated by heterogeneous Granger non-causality results. However, these
findings are not surprising, given that many low-income countries tend to be
more dependent on inward FDI inflows to stimulate their economic growth than
middle- income countries. Policy recommendations are discussed. |
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| ISSN: | 0013-3264 1820-7375 |