IDEAS home Printed from https://ideas.repec.org/a/vrs/suvges/v33y2023i4p45-69n6.html
   My bibliography  Save this article

Domestic Investment and Economic Growth Nexus: Does Absorptive Capacity Matter in The African Countries?

Author

Listed:
  • Ogunyomi-Oluyomi Oluwatosin Olatunji

    (Department of Economics, Mountain Top University, Magboro, Ogun State, Nigeria.)

  • George Emmanuel Oladapo

    (Department of Economics, Faculty of Social Sciences, Olabisi Onabanjo University, Nigeria)

  • Maku Olukayode Emmanuel

    (Department of Economics, Faculty of Social Sciences, Olabisi Onabanjo University, Nigeria.)

  • Adelowokan Oluwaseyi A.

    (Department of Economics, Faculty of Social Sciences, Olabisi Onabanjo University, Nigeria.)

Abstract

This study empirically examined the role of the country’s absorptive capacity on the impact of domestic investment on economic growth in the selected five African countries over the study period of 1970 to 2019. In specific, the study examined the impact of domestic investment on economic growth from two models, without the country’s absorptive capacity and with the country’s absorptive capacity. Further, a robust linear ordinary least squares (OLS) methodology including static panel OLS and panel cointegration estimators was employed. The study found that only changes in financial development and infrastructures positively cause changes in the domestic investment-economic growth nexus in the short run while in the long run, trade openness enhances the positive impact of domestic investment on economic growth in African countries. In addition, the study found that domestic investment retards economic growth without the country’s absorptive capacity in the short run and long run respectively in African countries. Therefore, the study recommended that policymakers should invest heavily in infrastructure and financial development systems as well as encourages trade openness for a stable domestic investment-economic growth nexus in African countries.

Suggested Citation

  • Ogunyomi-Oluyomi Oluwatosin Olatunji & George Emmanuel Oladapo & Maku Olukayode Emmanuel & Adelowokan Oluwaseyi A., 2023. "Domestic Investment and Economic Growth Nexus: Does Absorptive Capacity Matter in The African Countries?," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 33(4), pages 45-69, December.
    • Handle: RePEc:vrs:suvges:v:33:y:2023:i:4:p:45-69:n:6
    DOI: 10.2478/sues-2023-0018
    as

    Download full text from publisher

    File URL: https://doi.org/10.2478/sues-2023-0018
    Download Restriction: no
    File URL: https://libkey.io/10.2478/sues-2023-0018?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Gene M. Grossman & Elhanan Helpman, 1994. "Endogenous Innovation in the Theory of Growth," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 23-44, Winter.
    2. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    3. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
    4. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    5. Artur Ribaj & Fitim Mexhuani, 2021. "The impact of savings on economic growth in a developing country (the case of Kosovo)," Journal of Innovation and Entrepreneurship, Springer, vol. 10(1), pages 1-13, December.
    6. Miguel D. Ramirez & Nader Nazmi, 2003. "Public Investment and Economic Growth in Latin America: an Empirical Test," Review of Development Economics, Wiley Blackwell, vol. 7(1), pages 115-126, February.
    7. Oluwatosin Adeniyi & Bello Ajide & Afees Salisu, 2015. "Foreign Capital Flows, Financial Development And Growth In Sub-Saharan Africa," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 40(3), pages 85-103, September.
    8. Adams, Samuel, 2009. "Foreign Direct investment, domestic investment, and economic growth in Sub-Saharan Africa," Journal of Policy Modeling, Elsevier, vol. 31(6), pages 939-949, November.
    9. Yang Zou, 2006. "Empirical studies on the relationship between public and private investment and GDP growth," Applied Economics, Taylor & Francis Journals, vol. 38(11), pages 1259-1270.
    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. Oluwatosin Olatunji Ogunyomi-Oluyomi & Adeyemi Olayiwola Babasanya & Isiaq Olasunkanmi Oseni, 2023. "Interactive Effect Of Foreign Direct Investment (Fdi) Inflow And Absorptive Capacity On Economic Growth In The African Countries," Business & Management Compass, University of Economics Varna, issue 4, pages 267-285.
    2. repec:ebl:ecbull:v:2:y:2002:i:1:p:1-15 is not listed on IDEAS
    3. Gene M. Grossman & Elhanan Helpman, 1994. "Endogenous Innovation in the Theory of Growth," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 23-44, Winter.
    4. Aykut Kibritçioglu, 2002. "On the Smithian origins of "new" trade and growth theories," Economics Bulletin, AccessEcon, vol. 2(1), pages 1-15.
    5. Alejandro Díaz-Bautista, 2003. "Convergence And Economic Growth Considering Human Capital And R&D Spillovers," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 2(2), pages 127-143, Junio 200.
    6. Faruque Ahamed, 2021. "Impact of Public and Private Investments on Economic Growth of Developing Countries," Papers 2105.14199, arXiv.org.
    7. Bertola, Giuseppe, 2000. "Macroeconomics of distribution and growth," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 9, pages 477-540, Elsevier.
    8. Roth,Felix & Thum, Anna-Elisabeth, 2010. "Does intangible capital affect economic growth?," CEPS Papers 3667, Centre for European Policy Studies.
    9. Ejike Udeogu & Shampa Roy-Mukherjee & Uzochukwu Amakom, 2021. "Does Increasing Product Complexity and Diversity Cause Economic Growth in the Long-Run? A GMM Panel VAR Evidence," SAGE Open, , vol. 11(3), pages 21582440211, August.
    10. Aikaterini Kokkinou, 2005. "Entrepreneurship, Innovation Activities and Regional Growth," ERSA conference papers ersa05p419, European Regional Science Association.
    11. Hartwig, Johannes, 2022. "Semi-endogenous growth dynamics in a macroeconomic model with delays," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 538-551.
    12. Ruttan, Vernon W., 1998. "Growth Economics And Development Economics: What Should Development Economists Learn (If Anything) From The New Growth Theory?," Bulletins 12972, University of Minnesota, Economic Development Center.
    13. Simon, György, 1998. "Növekedési tényezők, ár-, bér- és profitmechanizmus a modern gazdaságban [Factors of growth, price, wage and profit mechanism in the modern economy]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 174-192.
    14. Bennett T. McCallum, 1996. "Neoclassical vs. endogenous growth analysis: an overview," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 41-71.
    15. Alejandro Diaz-Bautista, 2005. "Convergence and Economic Growth considering Human Capital and R&D Spillovers Convergencia y Crecimiento Economico en Mexico considerando al Capital Humano y derrames en Investigacion y Desarrollo," Urban/Regional 0506012, University Library of Munich, Germany.
    16. Schneider, Johannes & Ziesemer, Thomas, 1994. "What's New and What's Old in New Growth Theory: Endogenous Technology, Microfoundation, and Growth Rate Predictions," MPRA Paper 56132, University Library of Munich, Germany.
    17. Segerstrom, Paul, 1996. "Lecture Notes on Knowledge and Human Capital in the New Growth Theory," Working Paper Series 475, Research Institute of Industrial Economics.
    18. Rao, B. Bhaskara, 2010. "Estimates of the steady state growth rates for selected Asian countries with an extended Solow model," Economic Modelling, Elsevier, vol. 27(1), pages 46-53, January.
    19. van de Klundert, T.C.M.J. & Smulders, J.A., 1991. "Reconstructing growth theory : A survey," Other publications TiSEM 19355c51-17eb-4d5d-aa66-b, Tilburg University, School of Economics and Management.
    20. Vos, Rob & Frenkel, Roberto & Ocampo, José Antonio & Palma, José Gabriel & Marfán, Manuel & Ros, Jaime & Taylor, Lance & Correa, Nelson & Cimoli, Mario, 2005. "Beyond Reforms: Structural Dynamics and Macroeconomic Vulnerability," IDB Publications (Books), Inter-American Development Bank, number 347, November.
    21. Alfò, Marco & Carbonari, Lorenzo & Trovato, Giovanni, 2023. "On the effects of taxation on growth: an empirical assessment," Macroeconomic Dynamics, Cambridge University Press, vol. 27(5), pages 1289-1318, July.

    More about this item

    Keywords

    Domestic Investment; Economic growth; Absorptive Capacity; Static Panel OLS; Panel Cointegration OLS; African Countries;
    All these keywords.

    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

    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:vrs:suvges:v:33:y:2023:i:4:p:45-69:n:6. 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: Peter Golla (email available below). General contact details of provider: https://www.sciendo.com .

    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.