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Foreign Direct investment, domestic investment, and economic growth in Sub-Saharan Africa

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  • Adams, Samuel
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    Abstract

    The study analyzes the impact of foreign direct investment (FDI) and domestic investment (DI) on economic growth in Sub-Saharan Africa for the period 1990-2003. The results show that DI is positive and significantly correlated with economic growth in both the OLS and fixed effects estimation, but FDI is positive and significant only in the OLS estimation. The study also found that FDI has an initial negative effect on DI and subsequent positive effect in later periods for the panel of countries studied. The sign and magnitude of the current and lagged FDI coefficients suggest a net crowding out effect. The review of the literature and findings of the study indicate that the continent needs a targeted approach to FDI, increase absorption capacity of local firms, and cooperation between government and MNE to promote their mutual benefit.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Policy Modeling.

    Volume (Year): 31 (2009)
    Issue (Month): 6 (November)
    Pages: 939-949

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    Handle: RePEc:eee:jpolmo:v:31:y:2009:i:6:p:939-949

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    Web page: http://www.elsevier.com/locate/inca/505735

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    Keywords: Foreign direct investment Domestic investment Institutional infrastructure and economic growth;

    References

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    1. Sebnem Kalemli-Ozcan & Laura Alfaro & Selin Sayek & Areendam Chanda, 2002. "FDI and Economic Growth: The Role of Local Financial Markets," Macroeconomics 0212007, EconWPA.
    2. Hiranya K Nath, 2009. "Trade, Foreign Direct Investment, and Growth: Evidence from Transition Economies," Comparative Economic Studies, Palgrave Macmillan, vol. 51(1), pages 20-50, March.
    3. Akinlo, A. Enisan, 2004. "Foreign direct investment and growth in Nigeria: An empirical investigation," Journal of Policy Modeling, Elsevier, vol. 26(5), pages 627-639, July.
    4. Shiva S. Makki & Agapi Somwaru, 2004. "Impact of Foreign Direct Investment and Trade on Economic Growth: Evidence from Developing Countries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(3), pages 795-801.
    5. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1127-70, November.
    6. Hermes, Niels & Lensink, Robert, 2000. "Foreign direct investment, financial development and economic growth," Research Report 00E27, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    7. Kevin Sylwester, 2005. "Foreign direct investment, growth and income inequality in less developed countries," International Review of Applied Economics, Taylor & Francis Journals, vol. 19(3), pages 289-300.
    8. KH Zhang, 2001. "Does Foreign Direct Investment Promote Economic Growth? Evidence From East Asia And Latin America," Contemporary Economic Policy, Western Economic Association International, vol. 19(2), pages 175-185, 04.
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    Citations

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    Cited by:
    1. Jawaid, Syed Tehseen & Raza, Syed Ali, 2012. "Foreign Direct Investment, Growth and Convergence Hypothesis: A Cross Country Analysis," MPRA Paper 39000, University Library of Munich, Germany.
    2. Alguacil, M. & Cuadros, A. & Orts, V., 2011. "Inward FDI and growth: The role of macroeconomic and institutional environment," Journal of Policy Modeling, Elsevier, vol. 33(3), pages 481-496, May.
    3. Kemp-Benedict, Eric, 2012. "The national bioenergy investment model: Technical documentation," MPRA Paper 37835, University Library of Munich, Germany.
    4. Raza, Syed Ali & Jawaid, Syed Tehseen & Afshan, Sahar, 2013. "Is Stock Market Sensitive to Foreign Capital Inflows and Economic Growth? Evidence from Pakistan," MPRA Paper 48399, University Library of Munich, Germany.
    5. Sharif Hossain & Rajarshi Mitra, 2013. "The Determinants of Economic Growth in Africa: A Dynamic Causality and Panel Cointegration Analysis," Economic Analysis and Policy (EAP), Queensland University of Technology (QUT), School of Economics and Finance, vol. 43(2), pages 217-226, September.
    6. Kumar, Saten & Pacheco, Gail, 2012. "What determines the long run growth rate in Kenya?," Journal of Policy Modeling, Elsevier, vol. 34(5), pages 705-718.

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