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

  • Adams, Samuel
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    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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    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
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505735

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    1. Ndikumana, Leonce & Verick, Sher, 2008. "The Linkages between FDI and Domestic Investment: Unravelling the Developmental Impact of Foreign Investment in Sub-Saharan Africa," IZA Discussion Papers 3296, Institute for the Study of Labor (IZA).
    2. Sebnem Kalemli-Ozcan & Laura Alfaro & Selin Sayek & Areendam Chanda, 2002. "FDI and Economic Growth: The Role of Local Financial Markets," Macroeconomics 0212007, EconWPA.
    3. Maarten Bosker & Harry Garretsen, 2006. "Geography Rules Too! Economic Development and the Geography of Institutions," CESifo Working Paper Series 1769, CESifo Group Munich.
    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. Bengoa, Marta & Sanchez-Robles, Blanca, 2003. "Foreign direct investment, economic freedom and growth: new evidence from Latin America," European Journal of Political Economy, Elsevier, vol. 19(3), pages 529-545, September.
    6. Hiranya K. Nath, 2005. "Trade, Foreign Direct Investment and Growth: Evidence from Transition Economies," Working Papers 0504, Sam Houston State University, Department of Economics and International Business.
    7. Marcin Kolasa, 2007. "How do FDI Inflows Affect the Productivity of Domestic Firms? The Role of Horizontal and Vertical Spillovers, Absorptive Capacity and Competition," Chapters, in: Foreign Direct Investment in Europe, chapter 5 Edward Elgar.
    8. 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.
    9. Niels Hermes & Robert Lensink, 2003. "Foreign direct investment, financial development and economic growth," Journal of Development Studies, Taylor & Francis Journals, vol. 40(1), pages 142-163.
    10. 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.
    11. 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.
    12. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1127-70, November.
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