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The effect of foreign direct investment on the economic growth of Sub-Saharan African countries: An empirical approach

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  • Belesity Bekalu Ayenew

Abstract

The impact of foreign direct investment on the host country’s economic growth has been a source of debate in past theoretical and empirical investigations. The PMG/ARDL model, which has a practical advantage in examining the effect of foreign direct investment in the short and long run, has received little attention in prior empirical investigations. This study investigates the effect of foreign direct investment on the economic growth of Sub-Saharan African countries. The study examined panel data from 22 nations in Sub-Saharan Africa from 1988 to 2019. The PMG/ARDL model was used to look at the short- and long-term effects of foreign direct investment on economic growth. The panel unit root test and panel co-integration test were employed to improve the model’s estimation. According to the findings, in the long run, foreign direct investment has a favorable and significant effect, but it is statistically insignificant in the short run. The study concludes that foreign direct investment boosts long-term economic growth. As a result, countries in Sub-Saharan Africa should focus on attracting foreign direct investment.

Suggested Citation

  • Belesity Bekalu Ayenew, 2022. "The effect of foreign direct investment on the economic growth of Sub-Saharan African countries: An empirical approach," Cogent Economics & Finance, Taylor & Francis Journals, vol. 10(1), pages 2038862-203, December.
    • Handle: RePEc:taf:oaefxx:v:10:y:2022:i:1:p:2038862
    DOI: 10.1080/23322039.2022.2038862
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    Cited by:

    1. Chibalamula, Haggai Chibale & Evans, Yeboah & Kachelo, Mukuka & Bamwesigye, Dastan, 2023. "The Effect of Foreign Direct Investment and Trade Openness on Economic Growth: Evidence from Five African Countries," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 15(1), January.
    2. Scalamonti, Francesco, 2024. "The foreign investments-growth nexus in underdeveloped countries: the state-of-art of research analysing a selected and recent empirical literature (2020-2022)," Technological Forecasting and Social Change, Elsevier, vol. 198(C).

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