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The effect of foreign direct investment on the economic growth of Sub-Saharan African countries: An empirical approach

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  • Belesity Bekalu Ayenew

Abstract

The impact of foreign direct investment on the host country’s economic growth has been a source of debate in past theoretical and empirical investigations. The PMG/ARDL model, which has a practical advantage in examining the effect of foreign direct investment in the short and long run, has received little attention in prior empirical investigations. This study investigates the effect of foreign direct investment on the economic growth of Sub-Saharan African countries. The study examined panel data from 22 nations in Sub-Saharan Africa from 1988 to 2019. The PMG/ARDL model was used to look at the short- and long-term effects of foreign direct investment on economic growth. The panel unit root test and panel co-integration test were employed to improve the model’s estimation. According to the findings, in the long run, foreign direct investment has a favorable and significant effect, but it is statistically insignificant in the short run. The study concludes that foreign direct investment boosts long-term economic growth. As a result, countries in Sub-Saharan Africa should focus on attracting foreign direct investment.

Suggested Citation

  • Belesity Bekalu Ayenew, 2022. "The effect of foreign direct investment on the economic growth of Sub-Saharan African countries: An empirical approach," Cogent Economics & Finance, Taylor & Francis Journals, vol. 10(1), pages 2038862-203, December.
    • Handle: RePEc:taf:oaefxx:v:10:y:2022:i:1:p:2038862
    DOI: 10.1080/23322039.2022.2038862
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    Citations

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    Cited by:

    1. Emmanuel Saye & Martins Onyekwelu Onuorah, 2025. "An Empirical Assessment of the Impact of Trade Balance, Foreign Direct Investment (FDI), And Public Debt on Economic Growth in Liberia (2008–2023)," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 9(9), pages 3347-3356, September.
    2. Tharaka Magammana & Ayodhya Perera & Amanda Bandara & Himashi Muthugala & Ruwan Jayathilaka, 2026. "Drivers of Child Labour: Socio-Economic Insights from the 15 Worst-Affected Countries," Child Indicators Research, Springer;The International Society of Child Indicators (ISCI), vol. 19(2), pages 795-822, April.
    3. Emmanuel Mensah & Rachel Odoley Mensah & David Aboagye Danquah, 2024. "Threshold effects of inflation on the FDI – growth nexus: evidence from inflation-targeting countries in sub-Saharan Africa," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 37(1), pages 2299991-229, January.
    4. Chimere O. Iheonu & Godfrey I. Ihedimma & Charles Mbohwa, 2026. "Volatile Energy, Stunted Investment: How Energy Price Inflation Shapes Foreign Direct Investment Into Africa," World Affairs, John Wiley & Sons, vol. 189(1), January.
    5. Chibalamula, Haggai Chibale & Evans, Yeboah & Kachelo, Mukuka & Bamwesigye, Dastan, . "The Effect of Foreign Direct Investment and Trade Openness on Economic Growth: Evidence from Five African Countries," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 15(01).
    6. Scalamonti, Francesco, 2024. "The foreign investments-growth nexus in underdeveloped countries: the state-of-art of research analysing a selected and recent empirical literature (2020-2022)," Technological Forecasting and Social Change, Elsevier, vol. 198(C).
    7. Kamil Makiela & Bazoumana Ouattara, 2026. "FDI and Total Factor Productivity: Does the trajectory of FDI matter?," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 12(1), pages 1-23, December.
    8. Isubalew Daba Ayana & Wondaferahu Mulugeta Demissie & Atnafu Gebremeskel Sore, 2023. "Effect of government revenue on economic growth of sub-Saharan Africa: Does institutional quality matter?," PLOS ONE, Public Library of Science, vol. 18(11), pages 1-24, November.
    9. Himashi Muthugala & Tharaka Magammana & Amanda Bandara & Ayodhya Perera & Ruwan Jayathilaka, 2025. "Unveiling the Economic Determinants of Child Labour in Africa: A Comprehensive Study of 37 Countries," Child Indicators Research, Springer;The International Society of Child Indicators (ISCI), vol. 18(3), pages 1329-1361, June.

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