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A Pooled Mean Group Estimation of Capital Inflow and Growth in sub Saharan Africa

Author

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  • Chimere Okechukwu Iheonu
  • Godfrey Ikechukwu Ihedimma
  • Matilda Chinonyerem Omenihu

Abstract

This study empirically analysed the impact of capital inflow on growth in sub Saharan Africa employing the Pooled Mean Group estimator from the years 1985 to 2015. The study utilised Foreign Direct Investment (FDI), Official Development Assistance and Foreign Aid (ODA) and Remittance (REM) as indicators of capital inflow. Short run result indicates that the various forms of capital inflow do not have significant impact on growth but while FDI and REM were negatively related to growth, AID was positively related to growth. However, in the long run, FDI and AID have a positive and significant impact on growth while REM has a negative and significant impact on growth in sub Saharan Africa. The study concludes that planning and legislative lags are inferential from the insignificance of capital inflows on growth in the short run, while growth falls in the long run as a result of increase in labour’s income earned in diaspora. The study recommends that in the short run, economic policies should be tailored towards the development of technological based services while in the long run, government should create schemes for citizens in diaspora to participate in, to endear sector-specific economic activities as well as targeting FDI and AID as policy options to spur growth. Finally, specific capital inflow policy options should be employed as not all forms of capital inflow precipitates growth.

Suggested Citation

  • Chimere Okechukwu Iheonu & Godfrey Ikechukwu Ihedimma & Matilda Chinonyerem Omenihu, 0. "A Pooled Mean Group Estimation of Capital Inflow and Growth in sub Saharan Africa," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 20(65), pages 105-121, September.
    • Handle: RePEc:rej:journl:v:20:y::i:65:p:105-121
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    References listed on IDEAS

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    Cited by:

    1. Iheonu O Chimere & Tochukwu Nwachukwu, 2020. "Macroeconomic determinants of household consumption in selected West African countries," Economics Bulletin, AccessEcon, vol. 40(2), pages 1596-1606.
    2. Asongu, Simplice & Ezeaku, Hillary, 2020. "Aid Grants vs. Technical Cooperation Grants: Implications for Inclusive Growth in Sub-Saharan Africa, 1984-2018," MPRA Paper 107528, University Library of Munich, Germany.
    3. Suleman Sarwar & Dalia Streimikiene & Rida Waheed & Zouheir Mighri, 2021. "Revisiting the empirical relationship among the main targets of sustainable development: Growth, education, health and carbon emissions," Sustainable Development, John Wiley & Sons, Ltd., vol. 29(2), pages 419-440, March.
    4. Ibrahim A. Adekunle & Abayomi T. Onanuga & Ibrahim A. Odusanya, 2021. "Financial Integration and Growth Outcomes in Africa: Experience of the Trade Blocs," Research Africa Network Working Papers 21/052, Research Africa Network (RAN).
    5. Chimere O. Iheonu & Simplice A. Asongu & Kingsley O. Odo & Patrick K. Ojiem, 2020. "Financial sector development and Investment in selected countries of the Economic Community of West African States: empirical evidence using heterogeneous panel data method," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-15, December.
    6. Adusei, Elizabeth, 2020. "The impact of Foreign Aid on Economic Growth in Sub-Sahara Africa: The mediating role of Institutions," MPRA Paper 104561, University Library of Munich, Germany.
    7. Chimere O. Iheonu & Simplice A. Asongu & Kingsley O. Odo & Patrick K. Ojiem, 2020. "Financial Sector Development and Investment in Selected ECOWAS Countries: Empirical Evidence using Heterogeneous Panel Data Method," Research Africa Network Working Papers 20/045, Research Africa Network (RAN).

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    More about this item

    Keywords

    Capital Inflow; growth; panel cointegration; Pooled Mean Group;
    All these keywords.

    JEL classification:

    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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