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Foreign Direct Investment, Stock Market Development, and Inclusive Growth in Selected Sub-Saharan African Countries

In: The Economics of Banking and Finance in Africa

Author

Listed:
  • Saint Kuttu

    (University of Ghana Business School)

  • William Coffie

    (University of Ghana Business School)

  • Chimwemwe Chipeta

    (University of the Witwatersrand)

  • Ekow Afedzie

    (Ghana Stock Exchange)

Abstract

This paper examines the relationship between Foreign Direct Investment (FDI), Stock Market Development (SMD), and Inclusive Growth (IG) for 11 Sub-Saharan African countries for the period 1992 to 2019. We utilise dynamic panel data models using the Vector Error Correction Model (VECM) Granger causality framework and find that FDI has a positive effect on SMD. However, we do not find evidence suggesting that FDI and SMD exert a significant positive influence on IG. Also, IG, FDI, and SMD tend not to converge to their long-run equilibrium path in response to changes in any of the variables. However, the robustness tests estimated from panel models confirm the results from the VECM model. Also, the panel models show that human capital and the female labour force play a significant role in fostering IG. We further show that the availability of natural resources and domestic infrastructure attract FDI, while savings exert a significant negative influence on FDI.

Suggested Citation

  • Saint Kuttu & William Coffie & Chimwemwe Chipeta & Ekow Afedzie, 2022. "Foreign Direct Investment, Stock Market Development, and Inclusive Growth in Selected Sub-Saharan African Countries," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Joshua Yindenaba Abor & Charles Komla Delali Adjasi (ed.), The Economics of Banking and Finance in Africa, chapter 0, pages 987-1012, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-3-031-04162-4_29
    DOI: 10.1007/978-3-031-04162-4_29
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