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The Threshold Foreign Direct Investment under Application of the Growth Identification and Facilitation Framework: case of Benin

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  • Kokou Wotodjo Tozo

Abstract

This paper aims to contribute to the first stage in applying the Growth Identification and Facilitation Framework (GIFF) of the New Structural Economics (NSE). The key point is to give additional proactive guidelines to developing governments in their effort to attract foreign direct investment (FDI) for enabling growth and structural transformation under GIFF application. To proceed, we explore the importance of an initial condition. We claim that FDI has direct effect on growth only if it reaches a certain share of a country’s GDP, it remains negative otherwise. We provide an empirical verification to our underlying hypothesis and find that FDI has positive impact on growth in Benin only if its share exceeds 2.062% of the country’s GDP. Our finding, therefore, gives Benin Government a more precise target on the amount of FDI in the beginning.

Suggested Citation

  • Kokou Wotodjo Tozo, 2018. "The Threshold Foreign Direct Investment under Application of the Growth Identification and Facilitation Framework: case of Benin," International Journal of Science and Business, IJSAB International, vol. 2(3), pages 480-490.
    • Handle: RePEc:aif:journl:v:2:y:2018:i:3:p:480-490
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    References listed on IDEAS

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    4. Hansen Bruce E., 1997. "Inference in TAR Models," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 2(1), pages 1-16, April.
    5. Justin Yifu Lin & Jianjun Xu, 2016. "Applying the Growth Identification and Facilitation Framework to the Least Developed Countries: The Case of Uganda," CDP Background Papers 032, United Nations, Department of Economics and Social Affairs.
    6. de Mello, Luiz R, Jr, 1999. "Foreign Direct Investment-Led Growth: Evidence from Time Series and Panel Data," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 133-151, January.
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