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Assessing Foreign Direct Investment Long-Run Contribution to Financial Development: Evidence from Namibia

Author

Listed:
  • Veundjua Muruko-Jaezuruka

    (Coventry Business School, Coventry University)

  • Prashant Gupta

    (Brunel University London)

Abstract

We investigate the impact of Foreign Direct Investment on financial development using Domestic Credit to the Private Sector and Private Credit by Deposit money banks as a broader measure of financial indicators. We use the autoregressive distributed lag bounds co-integration analysis for long-run estimation on the Namibia economy as a case study for the periods 1990 to 2017. The Error Correction Model and the Granger causality approach are further used to examine the short-run dynamics and the direction of causality. Our results confirm the presence of a long-run association between FDI and financial development along with economic growth and human capital, the existence of uni-directional causal association from FDI to financial development measured in terms of domestic credit to the private sector, and bi-directional causation when measured in terms of private credit by deposit money banks. We conclude that FDI benefits Namibia financial system whilst playing a critical role in promoting human capital and economic development. Keywords: Foreign Direct Investment, Financial Development, Economic Growth, Human Capital, ARDL bounds, Granger Causality

Suggested Citation

  • Veundjua Muruko-Jaezuruka & Prashant Gupta, 2020. "Assessing Foreign Direct Investment Long-Run Contribution to Financial Development: Evidence from Namibia," Economics Bulletin, AccessEcon, vol. 40(4), pages 3111-3123.
    • Handle: RePEc:ebl:ecbull:eb-20-00420
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    More about this item

    Keywords

    Foreign Direct Investment; Financial Development; Economic Growth; Human Capital; ARDL bounds; Granger Causality;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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