IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-23-00222.html

The long and short run effects of foreign direct investment on economic complexity in Sub-Saharan African countries

Author

Listed:
  • Jasnine Mogem Kouam

    (University of Dschang)

  • Luc Nembot Ndeffo

    (University of Dschang)

  • Mathurin Aimé Mekam Pouatcha

    (University of Bamenda)

Abstract

This study examines the long and short run effects of foreign direct investment (FDI) on economic complexity using a sample of 21 Sub-Saharan African (SSA) countries over the period 1980-2017. The empirical evidence is based on the pooled mean group methodology. Results reveal a mixed impact of FDI on economic complexity. In particular, we found that FDI stimulates economic complexity in the long run whilst a negative relationship is observed in the short run. Remittances, corruption, health and GDP are found to be determinants of economic complexity. Furthermore, robustness checks show that regardless of the level of income our results are confirmed. Finally, our findings were robust when using the System Generalized Method of Moments (SGMM) as an alternative estimator.

Suggested Citation

  • Jasnine Mogem Kouam & Luc Nembot Ndeffo & Mathurin Aimé Mekam Pouatcha, 2023. "The long and short run effects of foreign direct investment on economic complexity in Sub-Saharan African countries," Economics Bulletin, AccessEcon, vol. 43(3), pages 1421-1433.
    • Handle: RePEc:ebl:ecbull:eb-23-00222
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/Pubs/EB/2023/Volume43/EB-23-V43-I3-P121.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mohamed Saadi, 2020. "Remittance Inflows and Export Complexity: New Evidence from Developing and Emerging Countries," Journal of Development Studies, Taylor & Francis Journals, vol. 56(12), pages 2266-2292, December.
    2. Tolulope T. Osinubi & Folorunsho M. Ajide, 2022. "Foreign direct investment and economic complexity in emerging economies," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 14(2), pages 245-256.
    3. Kamguia, Brice & Tadadjeu, Sosson & Miamo, Clovis & Njangang, Henri, 2022. "Does foreign aid impede economic complexity in developing countries?," International Economics, Elsevier, vol. 169(C), pages 71-88.
    4. Cesar A. Hidalgo & Ricardo Hausmann, 2009. "The Building Blocks of Economic Complexity," Papers 0909.3890, arXiv.org.
    5. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    6. Pedroni, Peter, 2004. "Panel Cointegration: Asymptotic And Finite Sample Properties Of Pooled Time Series Tests With An Application To The Ppp Hypothesis," Econometric Theory, Cambridge University Press, vol. 20(3), pages 597-625, June.
    7. Hashem Pesaran, M. & Yamagata, Takashi, 2008. "Testing slope homogeneity in large panels," Journal of Econometrics, Elsevier, vol. 142(1), pages 50-93, January.
    8. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
    9. T. S. Breusch & A. R. Pagan, 1980. "The Lagrange Multiplier Test and its Applications to Model Specification in Econometrics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(1), pages 239-253.
    10. Jude Eggoh & Chrysost Bangake & Gervasio Semedo, 2019. "Do remittances spur economic growth? Evidence from developing countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 28(4), pages 391-418, May.
    11. Tolulope T. Osinubi & Folorunsho M. Ajide, 2022. "Foreign direct investment and economic complexity in emerging economies," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 14(2), pages 259-270.
    12. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    13. Joakim Westerlund, 2007. "Testing for Error Correction in Panel Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(6), pages 709-748, December.
    14. Ahmad, Ahmad Hassan & Pentecost, Eric J. & Stack, Marie M., 2023. "Foreign aid, debt interest repayments and Dutch disease effects in a real exchange rate model for African countries," Economic Modelling, Elsevier, vol. 126(C).
    15. Peter Pedroni, 1999. "Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 653-670, November.
    16. Pesaran, M. Hashem & Vanessa Smith, L. & Yamagata, Takashi, 2013. "Panel unit root tests in the presence of a multifactor error structure," Journal of Econometrics, Elsevier, vol. 175(2), pages 94-115.
    17. Pesaran, M. Hashem & Shin, Yongcheol, 1996. "Cointegration and speed of convergence to equilibrium," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 117-143.
    18. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    19. M. Hashem Pesaran, 2007. "A simple panel unit root test in the presence of cross-section dependence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 265-312.
    20. Ludovic K. Feulefack & Bertelet S. Ngassam, 2020. "Natural resources, quality of institutions and foreign direct investment in Africa," Economics Bulletin, AccessEcon, vol. 40(1), pages 148-162.
    21. Jérôme Valette, 2018. "Do Migrants Transfer Productive Knowledge Back to Their Origin Countries?," Journal of Development Studies, Taylor & Francis Journals, vol. 54(9), pages 1637-1656, September.
    22. repec:bla:obuest:v:61:y:1999:i:0:p:653-70 is not listed on IDEAS
    23. Hameed Khan & Umair Khan & Muhammad Asif Khan, 2020. "Causal Nexus between Economic Complexity and FDI: Empirical Evidence from Time Series Analysis," Chinese Economy, Taylor & Francis Journals, vol. 53(5), pages 374-394, September.
    24. K. Schoors & B. Van Der Tol, 2002. "Foreign direct investment spillovers within and between sectors: Evidence from Hungarian data," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 02/157, Ghent University, Faculty of Economics and Business Administration.
    25. Payne, James E. & Truong, Huong Hoang Diep & Chu, Lan Khanh & Doğan, Buhari & Ghosh, Sudeshna, 2023. "The effect of economic complexity and energy security on measures of energy efficiency: Evidence from panel quantile analysis," Energy Policy, Elsevier, vol. 177(C).
    26. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    27. Folasade Bosede Adegboye & Romanus Osabohien & Felicia O. Olokoyo & Oluwatoyin Matthew & Oluwasogo Adediran, 2020. "Institutional quality, foreign direct investment, and economic development in sub-Saharan Africa," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 7(1), pages 1-9, December.
    28. M. Hashem Pesaran, 2021. "General diagnostic tests for cross-sectional dependence in panels," Empirical Economics, Springer, vol. 60(1), pages 13-50, January.
    29. Trang Thi-Huyen Dinh & Duc Hong Vo & Anh The Vo & Thang Cong Nguyen, 2019. "Foreign Direct Investment and Economic Growth in the Short Run and Long Run: Empirical Evidence from Developing Countries," JRFM, MDPI, vol. 12(4), pages 1-11, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marietta Yilen & Mekam Pouatcha Mathurin Aimé & Ethel Selamo, 2025. "Does domestic investment spur economic complexity? Effects and transmission channels," Economics Bulletin, AccessEcon, vol. 45(3), pages 1240-1259.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shreya Pal, 2024. "The International Capital Flows and Domestic Savings–domestic Investment Nexus: A Comparative Evidence Between Heterogeneous Developing Regions," South Asian Journal of Macroeconomics and Public Finance, , vol. 13(2), pages 169-212, December.
    2. Anil Shrestha & Makoto Kakinaka, 2022. "Remittance Inflows and Energy Transition of the Residential Sector in Developing Countries," Sustainability, MDPI, vol. 14(17), pages 1-19, August.
    3. Qamruzzaman, Md, 2022. "Nexus between renewable energy, foreign direct investment, and agro-productivity: The mediating role of carbon emission," Renewable Energy, Elsevier, vol. 184(C), pages 526-540.
    4. Naima Chrid & Sami Saafi & Mohamed Chakroun, 2021. "Export Upgrading and Economic Growth: a Panel Cointegration and Causality Analysis," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(2), pages 811-841, June.
    5. Shujaat Naeem Azmi & Tasneem Khan & Wajahat Azmi & Naghma Azhar, 2023. "A panel cointegration analysis of linkages between international trade and tourism: case of India and South Asian Association for Regional Cooperation (SAARC) countries," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(6), pages 5157-5176, December.
    6. Peñasco, Cristina & del Río, Pablo & Romero-Jordán, Desiderio, 2017. "Gas and electricity demand in Spanish manufacturing industries: An analysis using homogeneous and heterogeneous estimators," Utilities Policy, Elsevier, vol. 45(C), pages 45-60.
    7. Muhammad Azam & Zia Ur Rehman & Yusnidah Ibrahim, 2022. "Causal nexus in industrialization, urbanization, trade openness, and carbon emissions: empirical evidence from OPEC economies," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(12), pages 13990-14010, December.
    8. Waqas & Dilawar Khan & Róbert Magda, 2022. "The Impact of Forest Wood Product Exports on Environmental Performance in Asia," Sustainability, MDPI, vol. 14(20), pages 1-14, October.
    9. Vogel, Johanna, 2013. "Regional Convergence in Europe: A Dynamic Heterogeneous Panel Approach," MPRA Paper 51794, University Library of Munich, Germany.
    10. Hossain, Mohammad Razib & Rao, Amar & Sharma, Gagan Deep & Dev, Dhairya & Kharbanda, Aeshna, 2024. "Empowering energy transition: Green innovation, digital finance, and the path to sustainable prosperity through green finance initiatives," Energy Economics, Elsevier, vol. 136(C).
    11. Tarik Dogru & Umit Bulut & Ercan Sirakaya-Turk, 2021. "Modeling tourism demand: Theoretical and empirical considerations for future research," Tourism Economics, , vol. 27(4), pages 874-889, June.
    12. Md. Qamruzzaman & Jianguo Wei, 2019. "Financial Innovation and Financial Inclusion Nexus in South Asian Countries: Evidence from Symmetric and Asymmetric Panel Investigation," IJFS, MDPI, vol. 7(4), pages 1-27, October.
    13. Dimitrios Bakas & Theodore Panagiotidis & Gianluigi Pelloni, 2017. "Regional And Sectoral Evidence Of The Macroeconomic Effects Of Labor Reallocation: A Panel Data Analysis," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 501-526, January.
    14. Fromentin, Vincent, 2017. "The long-run and short-run impacts of remittances on financial development in developing countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 66(C), pages 192-201.
    15. Usman, Muhammad & Makhdum, Muhammad Sohail Amjad, 2021. "What abates ecological footprint in BRICS-T region? Exploring the influence of renewable energy, non-renewable energy, agriculture, forest area and financial development," Renewable Energy, Elsevier, vol. 179(C), pages 12-28.
    16. Francisco García-Lillo & Eduardo Sánchez-García & Bartolomé Marco-Lajara & Pedro Seva-Larrosa, 2023. "Renewable Energies and Sustainable Development: A Bibliometric Overview," Energies, MDPI, vol. 16(3), pages 1-22, January.
    17. Jin, Taeyoung, 2022. "Impact of heat and electricity consumption on energy intensity: A panel data analysis," Energy, Elsevier, vol. 239(PA).
    18. Lau, Lin-Sea & Choong, Chee-Keong & Ng, Cheong-Fatt & Liew, Feng-Mei & Ching, Suet-Ling, 2019. "Is nuclear energy clean? Revisit of Environmental Kuznets Curve hypothesis in OECD countries," Economic Modelling, Elsevier, vol. 77(C), pages 12-20.
    19. Acikgoz, Senay & Ben Ali, Mohamed Sami, 2019. "Where does economic growth in the Middle Eastern and North African countries come from?," The Quarterly Review of Economics and Finance, Elsevier, vol. 73(C), pages 172-183.
    20. Sung, Bongsuk & Song, Woo-Yong & Park, Sang-Do, 2018. "How foreign direct investment affects CO2 emission levels in the Chinese manufacturing industry: Evidence from panel data," Economic Systems, Elsevier, vol. 42(2), pages 320-331.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-23-00222. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.