On the foreign direct investment–economic growth relationship in Africa: does economic freedom mediate this relationship?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Olufemi Adewale Aluko ◽  
Muazu Ibrahim ◽  
Xuan Vinh Vo
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Economic Freedom ◽  
Empirical Literature ◽  
African Countries ◽  
Content Type ◽  
Economic Freedom Index ◽  
Bootstrap Algorithm ◽  
The Impact

PurposeIn this study, the authors examine how economic freedom mediates the impact of foreign direct investment (FDI) on economic growth in Africa.Design/methodology/approachBy using data from 41 countries over the period 2000–2017, the authors invoke Seo and Shin's (2016) sample splitting approach while relying on the recently developed Seo et al.'s (2019) computationally robust bootstrap algorithm to achieve the purpose of this study.FindingsThe authors find evidence of economic freedom threshold that bifurcates the link between FDI and economic growth in Africa. More precisely, FDI does not improve overall economic growth for African countries whose economic freedom index is below the estimated threshold while significantly spurring growth for African countries with economic freedom above this threshold.Practical implicationsAfrican countries need to strive towards improving their level of economic freedom through the strengthening of rule of law, reducing government size, promoting regulatory efficiency and further opening of the goods and capital markets.Originality/valueThe association between FDI and economic growth has been well documented. While the positive theoretical postulations are almost conclusive, empirical literature on the precise effect of FDI remains contentious and far from being settled. What is missing in the existing literature in Africa is whether countries' level of economic freedom mediates how FDI explains the variations in economic growth across African countries. The authors fill this research gap.

scholarly journals Selected macroeconomic determinants and economic growth in Cameroon (1970–2018) “dead or alive” an ARDL approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Kesuh Jude Thaddeus ◽  
Chi Aloysius Ngong ◽  
Njimukala Moses Nebong ◽  
Akume Daniel Akume ◽  
Jumbo Urie Eleazar ◽  
...  
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Government Expenditure ◽  
Human Capital Development ◽  
Content Type ◽  
Capital Development ◽  
Macroeconomic Determinants ◽  
The Impact

PurposeThe purpose of this paper is to examine key macroeconomic determinants on Cameroon's economic growth from 1970 to 2018.Design/methodology/approachData were obtained from the World Development Indicators and applied on time series data econometric techniques. The auto-regressive distributed lag (ARDL) bounds model analyzed the data since the variables had different order of integration.FindingsThe results showed long and short runs’ positive and significant connection between economic growth in Cameroon and government expenditure; trade openness, gross capital formation and exchange rate. Human capital development, foreign aid, money supply, inflation and foreign direct investment negatively and significantly affected economic growth in the short and long-runs. Hence, the macroeconomic indicators are not death.Research limitations/implicationsThe present research paper has tried to capture the impact of nine macroeconomic determinants on economic growth such as the government expenditure (LNGOVEXP), human capital development (LNHCD), foreign aids (AID), trade openness (LNTOP), foreign direct investment (LNFDI), gross capital formation (INVEST), broad money (LNM2), official exchange rate (LNEXHRATE) and Inflation (LNINFLA). However, these variables have the tendency to affect each other in a unidirectional or bidirectional manner. Further, the present research paper is unable to capture the impact of other macroeconomic variable due to the unavailability of data.Practical implicationsThe study recommends that Cameroon should use proper planning and strategic policy interventions to achieve higher sustainable economic growth with human capital development, foreign aid, money supply, foreign direct investment and moderate inflation.Social implicationsMacroeconomic indicators, if managed well, increase economic growth.Originality/valueThis paper to the best of the researcher's knowledge presents new background information to both policymakers and researchers on the main macroeconomic determinants using econometric analysis.

scholarly journals Exploration of the Impact of China’s Outward Foreign Direct Investment (FDI) on Economic Growth in Asia and North Africa along the Belt and Road (B&R) Initiative

2021 ◽  
Vol 13 (4) ◽  
pp. 1623
Author(s):  
Alnoah Abdulsalam ◽  
Helian Xu ◽  
Waqar Ameer ◽  
AL-Barakani Abdo ◽  
Jiejin Xia
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Trade Openness ◽  
Ordinary Least Squares ◽  
Host Countries ◽  
African Countries ◽  
Belt And Road ◽  
The Impact ◽  
The Belt And Road

This empirical study has examined the impact of Chinese investments, namely infrastructure, energy, services, other investment sectors, and trade openness on the economies of the 25 Asian and North African countries along with the Belt and Road (B&R) Initiative for a period of 2007 to 2016 using the Johansen Fisher Panel Cointegration Test, Panel Dynamic Ordinary Least Squares (PDOLS) model, and the Toda and Yamamoto technique for testing causality. The findings revealed cointegration among the variables and that the impact of Chinese investments on economic growth in the host countries is positive, but it has a weaker effect, to a certain extent, in all sectors of the host countries while trade openness positively impacts the countries. Furthermore, there is evidence of a unidirectional causality between some FDI (foreign direct investment) economies while the investment in services and other sectors does not cause economic growth in the host countries. Based on the results, the paper proposes that the host countries increase the FDI in the sector of infrastructure, energy, and technology to enhance their economies.

Does foreign direct investment affect economic growth? The case of Turkey

2014 ◽  
Vol 41 (6) ◽  
pp. 434-449 ◽  
Author(s):  
Birgül Cambazoglu ◽  
Hacer Simay Karaalp
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
International Trade ◽  
Direct Investment ◽  
Growth Strategy ◽  
Volume Index ◽  
Outward Fdi ◽  
Content Type ◽  
The Real ◽  
The Impact

Purpose – The purpose of this paper is to analyze the impact of inward foreign direct investment (FDI) and international trade on economic growth in Turkey for the post-liberalization period (1980-2010). Design/methodology/approach – The paper employs the vector auto-regression model with four variables: real GDP growth, real inward FDI, the real import volume index and the real export volume index. Findings – Empirical results suggest a relationship between economic growth, inward FDI and exports. Practical implications – The results derived in this paper shed light on the relationship between FDI and international trade on economic growth for Turkey, which has been applying an export-led growth strategy since 1980, and has been implementing many regulations to attract foreign capital. It is evident that although Turkey's efforts and the importance of this issue, new policies and stabilization regulations must be established for the Turkish economy. Originality/value – This study contributes to the literature in at least two aspects. First, a comparative analysis of Turkey's inward and outward FDI with respect to different country groups was analyzed. Second, apart from other studies, the effect of inward FDI and international trade on Turkey's economic growth was tested utilizing an econometric method from 1980 to 2010, which is a relatively long time period for Turkey.

scholarly journals FDI, ECONOMIC FREEDOM AND ECONOMIC GROWTH OF NIGERIA

2021 ◽  
Vol 2 (2) ◽  
pp. 01-16
Author(s):  
J.O. Sekunmade
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Regression Analysis ◽  
Granger Causality ◽  
Direct Investment ◽  
Economic Freedom ◽  
Test Method ◽  
Series Data ◽  
Vector Autoregressive ◽  
The Impact

This paper investigates Foreign Direct Investment, Economic Freedom and Economic Growth of Nigeria between 1995 and 2018. Specifically, the data on: Foreign Direct Investment (FDI) inflows, Economic Freedom (Aggregate index) and the data on real gross domestic product (RGDP) were used during the analysis. Time-series data were tested for stationarity using the Augmented Dickey-Fuller Unit Root test method. Vector Autoregressive (VAR) estimation method was adopted to examine the effect of FDI, Economic Freedom on Economic growth. The interactive effect of FDI and Economic Freedom on Economic growth was determined using regression analysis while Granger Causality test method was adopted for determining the causality relationship among the variables. The result of the Vector Autoregressive (VAR) suggests that both FDI and Economic freedom do not have a significant effect on economic growth in Nigeria. The result of regression analysis shows that the joint coefficient of both FDI and EF is negative and not significant. The result of Granger Causality revealed that there is a uni-directional relationship between RGDP and FDI and between EF and FDI respectively. The research recommends that the federal government of Nigeria should adopt appropriate foreign trade strategies to enhance the impact of FDI on economic growth in Nigeria.

The Impact of Asian Foreign Direct Investment, Trade on Africa’s Economic Growth

2017 ◽  
Vol 3 (1) ◽  
pp. 72-85 ◽  
Author(s):  
Modou Diouf ◽  
Yun Liu Hai
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Developing Economies ◽  
Trade Openness ◽  
Ordinary Least Squares ◽  
West African ◽  
African Countries ◽  
Market Opportunities ◽  
The Impact

Globalization of capital and especially foreign direct investment (FDI) and trade has increased dramatically over the past decades. In developing economies; FDI has become the most stable and largest component of capital flows. This study examines the interaction between FDI, trade openness and economic growth with a focus on Asian FDI, trade and 13 West African countries for the period 1980-2015. The results from weighted Fully Modified Ordinary Least Squares (FMOLS) show that both FDI and trade significantly contribute to economic growth. The study also indicates that a unidirectional causality runs from FDI to economic growth indicating FDI-growth-led hypothesis while a bidirectional causality is detected between trade and economic growth validating feedback-effect. Increasing FDI could also promote trade by opening and expanding market opportunities.

Foreign direct investment and economic growth in South America

2019 ◽  
Vol 46 (2) ◽  
pp. 383-398 ◽  
Author(s):  
Victor Owusu-Nantwi ◽  
Christopher Erickson
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
South America ◽  
Growth And Development ◽  
Direct Investment ◽  
Positive Impact ◽  
Cointegration Test ◽  
Content Type ◽  
Long Run ◽  
The Impact

Purpose The purpose of this paper is to investigate the impact of foreign direct investment (FDI) on economic growth in countries in South America. Additionally, the study explores the causal linkage between FDI and growth in the region. Design/methodology/approach The study employs Pedroni’s cointegration test to examine the long-run relationship between FDI and economic growth in South America. Further, the study employs the vector error correction model (VECM) to examine the long-run relationship, and the causal nexus between FDI and economic growth in South America for the period 1980–2015. Findings The Pedroni cointegration test establishes a long-run relationship between FDI and economic growth in a panel of ten countries in South America. The long-run estimates of the study find a significant positive impact of FDI on economic growth in the region. The VECM results find a short-run bidirectional causality between FDI and economic growth. The error-term is negative and significant. This indicates the presence of long-run equilibrium relationship among the variables. Practical implications Countries in South America should adopt policies that would substantially enlarge FDI inflows to enhance their growth and development. Originality/value Numerous studies have examined the impact of FDI on economic growth in the context of Latin America. This study fills a gap in the existing literature by providing an empirical evidence that focuses on South America. This additional perspective could form the basis for the evaluation of the investment policies, and help policymakers to pursue FDI policies that would enhance growth and development in South America.

Effect of Chinese foreign direct investment on economic growth in Africa

2017 ◽  
Vol 10 (2) ◽  
pp. 162-171 ◽  
Author(s):  
Isaac Doku ◽  
John Akuma ◽  
John Owusu-Afriyie
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Gdp Growth ◽  
Least Squares Regression ◽  
African Countries ◽  
Causality Test ◽  
Content Type ◽  
Quantitative Effect ◽  
Chinese Foreign Direct Investment

Purpose This study aims to examine the quantitative effect and direction of Chinese Foreign Direct Investment (FDI) on economic growth in Africa using a sample of 20 African countries from 2003 to 2012 with data obtained from United Nations Conference on Trade and Development and the World Bank. Design/methodology/approach The study used panel least squares regression, specifically fixed effect model to examine the quantitative effect of Chinese FDI on economic growth in Africa. The study also used Granger causality test to examine whether a causal relationship exists between economic growth and China’s FDI in Africa. Findings The study finds that a 1 per cent increase in China’s FDI stock in Africa significantly increases Africa’s gross domestic product (GDP) growth by 0.607 per cent, all things being equal. Furthermore, the study finds that a causal link exists between GDP growth in Africa and China’s FDI and the nature of causality is unidirectional. Practical implications The study recommends that to stimulate Chinese FDI in Africa, free visas must be given to Chinese investors coming into the continent, low tariffs should be imposed on inputs and intermediate goods from China and grant of business operation permit to Chinese investors must be made less bureaucratic. Originality/value This research has not been presented to any journal for publication and is originally written by the authors.

scholarly journals The Impact of FDI Inflows, Exports and Domestic Investment on Economic Growth in Africa

2018 ◽  
Vol 10 (4(J)) ◽  
pp. 152-164
Author(s):  
Alexander Maune
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Mean Squared Error ◽  
Domestic Investment ◽  
African Countries ◽  
Socioeconomic Changes ◽  
Research Findings ◽  
The Impact ◽  
The Relationship

The topic regarding the impact of foreign direct investment net inflows, exports and domestic investment on economic growth has resulted in mixed research findings across the globe. Literature related to the above variables in five selected African countries drawn from the five sub-regions is critically reviewed in this article. Furthermore, an econometric analysis of these variables is done to ascertain their impact on economic growth. The findings are compared to previous findings in other studies. The researcher found similar results in some variables when compared to previous researches in other countries. The study found that the independent statistical variables significantly predicted gross domestic product, with F (3, 63) = 5.84, P > F 0.0014, R2 = 0.2176, adjusted R2 = 0.1804 and root mean squared error (RMSE) = 0.54976. The independent variables added significantly to the prediction of p < 0.05. The researcher challenges the notion that the impact of foreign direct investment net inflows, exports and domestic investment on economic growth should always be positive and significant. This study provides a refreshed appreciation of the relationship between foreign direct investment net inflows, exports, domestic investment and economic growth in light of rapid socioeconomic changes in the sampled countries. The article also proposes some critical considerations regarding this relationship.

Sign in / Sign up

Export Citation Format

Share Document