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A Bivariate Causality Analysis on the Impact of Foreign Direct Investment Inflows on the Economic Growth of The Gambia

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  • Lee
  • Cheng-Wen
  • Mendy
  • Patrick A.

Abstract

This study explores the relationship between Foreign Direct Investment (FDI) and Economic Growth (GDP) in The Gambia using OLS, Johansen’s Cointegration, VECM approach on time series data from 1963 to 2023 period. Through a bivariate regression analysis, the findings reveal a significant and positive association between FDI inflows and economic growth. The estimated model shows that FDI has a substantial impact on GDP, explaining approximately 30.6 percent of the variation in economic performance. Despite the moderate explanatory power, the statistically significant coefficient underscores FDI's potential as a catalyst for growth. The Granger Causality results analysis indicates a non-directional causal relationship for GDP and FDI. These findings imply that while FDI is important, a broader policy mix is required to sustain and enhance growth in The Gambia.  JEL classification numbers: F21, F43, O11, O55, C32.

Suggested Citation

  • Lee & Cheng-Wen & Mendy & Patrick A., 2025. "A Bivariate Causality Analysis on the Impact of Foreign Direct Investment Inflows on the Economic Growth of The Gambia," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 15(4), pages 1-2.
    • Handle: RePEc:spt:admaec:v:15:y:2025:i:4:f:15_4_2
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    Keywords

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    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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