IDEAS home Printed from https://ideas.repec.org/a/ibn/ijefaa/v16y2024i12p73.html
   My bibliography  Save this article

The Moderation Role of Corruption in the Relationship between Foreign Direct Investment and Economic Growth in Sub-Saharan African Countries

Author

Listed:
  • Gideon Nyamweya Mokaya
  • Winnie Iminza Nyamute
  • Kennedy Okiro
  • Laura Nelima Barasa

Abstract

Foreign direct investment has recently become a major source of external financing among the developing countries. The Sub-Saharan Africa has become a major investment destination by the foreign investors. The literature shows that foreign direct investment contributes to economic growth through technological spillovers from developed countries to developing countries. In addition, FDI leads to the human capital development and employment creation. It also promotes international trade integration thus creating a competitive environment for local enterprises. Despite the increase in FDI in the Sub-Saharan Africa region, proportionate economic growth has not been realized. Corruption levels are also high in the region thus necessitating the need to investigate its role in the FDI economic growth nexus. Many studies have investigated the direct relationship between FDI and economic growth. There is also quite a number of studies that have studied the direct relationship between corruption and economic growth. However, a study on the moderating role of corruption on the relationship between FDI and economic growth is yet to be carried out. This study therefore investigates the moderating role of corruption on the relationship between FDI and economic growth in the Sub-Saharan Africa using data from 46 countries. The study uses fixed effects model. The study finds a negative and significant coefficient of the interaction term between FDI and corruption. This finding reveals that a corruption distorts the effectiveness of FDI in realizing economic growth. The study recommends the need for government to put in place strong institutions that deter corruption in the region.

Suggested Citation

  • Gideon Nyamweya Mokaya & Winnie Iminza Nyamute & Kennedy Okiro & Laura Nelima Barasa, 2024. "The Moderation Role of Corruption in the Relationship between Foreign Direct Investment and Economic Growth in Sub-Saharan African Countries," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 16(12), pages 1-73, December.
    • Handle: RePEc:ibn:ijefaa:v:16:y:2024:i:12:p:73
    as

    Download full text from publisher

    File URL: https://ccsenet.org/journal/index.php/ijef/article/download/0/0/50957/55246
    Download Restriction: no
    File URL: https://ccsenet.org/journal/index.php/ijef/article/view/0/50957
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Khobai Hlalefang & Hamman Nicolene & Mkhombo Thando & Mhaka Simba & Mavikela Nomahlubi & Phiri Andrew, 2018. "The FDI-Growth Nexus in South Africa: A Re-Examination Using Quantile Regression Approach," Studia Universitatis Babeș-Bolyai Oeconomica, Sciendo, vol. 63(3), pages 33-55, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Udi Joshua & Festus V. Bekun & Samuel A. Sarkodie, 2020. "New Insight into the Causal Linkage between Economic Expansion, FDI, Coal consumption, Pollutant emissions and Urbanization in South Africa," Working Papers 20/011, European Xtramile Centre of African Studies (EXCAS).
    2. Lukman A. Olorogun, 2024. "Modelling Financial Development in the Private Sector, FDI, and Sustainable Economic Growth in sub-Saharan Africa: ARDL Bound Test-FMOLS, DOLS Robust Analysis," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 8416-8434, June.
    3. Andrew Phiri, 2020. "Creative industries and economic performance: Should South Africa go to the movies?," Working Papers 2002, Department of Economics, Nelson Mandela University, revised Jan 2020.
    4. Udi Joshua & Mathew Ekundayo Rotimi & Samuel Asumadu Sarkodie, 2020. "Global FDI Inflow and Its Implication across Economic Income Groups," JRFM, MDPI, vol. 13(11), pages 1-15, November.
    5. Lukman Ayinde Olorogun, 2022. "Revisiting the Nexus of FDI-Led Growth Hypothesis and Economic Development in Rwanda: a Johansen-ARDL Approach to Cointegration," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(4), pages 2695-2717, December.
    6. Hlongwane, Nyiko Worship & Mmutle, Tumelo Donald & Daw, Olebogeng David, 2021. "The relationship between foreign direct investment and economic growth in SADC region from 2000 to 2019: An econometric view," MPRA Paper 111008, University Library of Munich, Germany.
    7. Udi Joshua & David Babatunde & Samuel Asumadu Sarkodie, 2021. "Sustaining Economic Growth in Sub-Saharan Africa: Do FDI Inflows and External Debt Count?," JRFM, MDPI, vol. 14(4), pages 1-13, March.
    8. Ben-Salha Ousama & Zmami Mourad, 2020. "The impact of private capital flows on economic growth in the MENA region," Economics and Business Review, Sciendo, vol. 6(3), pages 45-67, August.
    9. Udi Joshua, 2019. "An ARDL Approach to the Government Expenditure and Economic Growth Nexus in Nigeria," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 5(3), pages 152-160, September.
    10. Mohammad Omar FARUK, 2024. "Nexus between global financial integration and economic growth: An ARDL approach," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(639), S), pages 161-182, Summer.

    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ibn:ijefaa:v:16:y:2024:i:12:p:73. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Canadian Center of Science and Education (email available below). General contact details of provider: https://edirc.repec.org/data/cepflch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.