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Domestic Investment and Economic Growth Nexus: Does Absorptive Capacity Matter in The African Countries?

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  • Ogunyomi-Oluyomi Oluwatosin Olatunji

    (Department of Economics, Mountain Top University, Magboro, Ogun State, Nigeria.)

  • George Emmanuel Oladapo

    (Department of Economics, Faculty of Social Sciences, Olabisi Onabanjo University, Nigeria)

  • Maku Olukayode Emmanuel

    (Department of Economics, Faculty of Social Sciences, Olabisi Onabanjo University, Nigeria.)

  • Adelowokan Oluwaseyi A.

    (Department of Economics, Faculty of Social Sciences, Olabisi Onabanjo University, Nigeria.)

Abstract

This study empirically examined the role of the country’s absorptive capacity on the impact of domestic investment on economic growth in the selected five African countries over the study period of 1970 to 2019. In specific, the study examined the impact of domestic investment on economic growth from two models, without the country’s absorptive capacity and with the country’s absorptive capacity. Further, a robust linear ordinary least squares (OLS) methodology including static panel OLS and panel cointegration estimators was employed. The study found that only changes in financial development and infrastructures positively cause changes in the domestic investment-economic growth nexus in the short run while in the long run, trade openness enhances the positive impact of domestic investment on economic growth in African countries. In addition, the study found that domestic investment retards economic growth without the country’s absorptive capacity in the short run and long run respectively in African countries. Therefore, the study recommended that policymakers should invest heavily in infrastructure and financial development systems as well as encourages trade openness for a stable domestic investment-economic growth nexus in African countries.

Suggested Citation

  • Ogunyomi-Oluyomi Oluwatosin Olatunji & George Emmanuel Oladapo & Maku Olukayode Emmanuel & Adelowokan Oluwaseyi A., 2023. "Domestic Investment and Economic Growth Nexus: Does Absorptive Capacity Matter in The African Countries?," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 33(4), pages 45-69, December.
    • Handle: RePEc:vrs:suvges:v:33:y:2023:i:4:p:45-69:n:6
    DOI: 10.2478/sues-2023-0018
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • 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

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