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Official Development Assistance and Foreign Direct Investment: An Empirical Investigation of Their Implications for Domestic Capital Formation in Africa

Author

Listed:
  • Hongliang Zhang

    (Department of Accounting, Beijing Technology and Business University)

  • Betul Arda

    (College of Management, University of Massachusetts Boston)

  • Yuechan Lu

    (College of Management, University of Massachusetts Boston)

  • Senlin Miao

    (School of Economics, Anhui University)

Abstract

This study assesses the relationship between official development assistance (ODA) and foreign direct investment (FDI) and the extent to which each influenced domestically financed capital formation (DFCF) in Africa. An empirical analysis using dynamic panel data estimation methods reveals that both FDI and ODA exerted independent and interactive effects on DFCF in the typical study country. We find that the effect of FDI on DFCF is generally negative, while that of ODA is positive. Whether ODA influenced FDI is observed to depend, in part, on whether the aid was committed to complementary or productive activities in the recipient countries.

Suggested Citation

  • Hongliang Zhang & Betul Arda & Yuechan Lu & Senlin Miao, 2018. "Official Development Assistance and Foreign Direct Investment: An Empirical Investigation of Their Implications for Domestic Capital Formation in Africa," Annals of Economics and Finance, Society for AEF, vol. 19(2), pages 653-681, November.
    • Handle: RePEc:cuf:journl:y:2018:v:19:i:2:zhang:arda:lu:miao
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    More about this item

    Keywords

    Stock Liquidity and Price Crash Risk: Evidence from a Kernel Matching Approach;

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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