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Economic Growth, Foreign Direct Investments and Official Development Assistance Nexus: Panel ARDL Approach

Author

Listed:
  • Francois Cornelius Wehncke

    (Department of Finance, Risk Management and Banking, University of South Africa, Pretoria P.O. Box 392, South Africa)

  • Godfrey Marozva

    (Department of Finance, Risk Management and Banking, University of South Africa, Pretoria P.O. Box 392, South Africa)

  • Patricia Lindelwa Makoni

    (Department of Finance, Risk Management and Banking, University of South Africa, Pretoria P.O. Box 392, South Africa)

Abstract

Scholars and practitioners are torn between diverging viewpoints on the contribution of foreign assistance and foreign direct investment to the economic development, economic growth, and prosperity of Africa. This paper aims to examine the long-term and causal relationship between foreign direct investment, official development assistance, and economic growth for 20 selected African countries from 2000–2018. Autoregressive distributed lags and the error correction model were used as the primary estimation techniques. The results indicated a notable positive long-term cointegrating relationship between official development assistance and economic growth, and between economic growth and foreign direct investment, as well as a cointegrating link between foreign direct investment and official development assistance. Economic growth was found to promote official development assistance, while foreign direct investment was found to encourage economic growth and official development assistance was found to promote economic growth in the long run. Since foreign direct investment and official development assistance are important to economic growth in a spiral effect, African countries are encouraged to put in place policies that attract foreign direct investment and official development assistance. Thus, African countries should align their foreign and domestic investment and official development aid policies with their national developmental goals to attract foreign donations and investments.

Suggested Citation

  • Francois Cornelius Wehncke & Godfrey Marozva & Patricia Lindelwa Makoni, 2022. "Economic Growth, Foreign Direct Investments and Official Development Assistance Nexus: Panel ARDL Approach," Economies, MDPI, vol. 11(1), pages 1-15, December.
    • Handle: RePEc:gam:jecomi:v:11:y:2022:i:1:p:4-:d:1010321
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    References listed on IDEAS

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