The Dynamic Intricacies of External Debt and FDI Moderated by Rule of Law, Voice and Accountability Economic Growth Nexus in EAC Partner States: A Panel NARDL Analysis

The dynamic intricacies of external debt and Foreign Direct Investment (FDI) moderated by rule of law, voice and accountability economic growth nexus is scant in the East African Community (EAC). Plenteous of empirical literatures result into ambiguous conclusions. The two foreign capital inflows entail a complex and multifaceted balancing mechanism. Empirical studies have generated contention in the literature that shows how the intricacies’ interplay between external debt and FDI can have inconclusive results on economic growth. The interplays can negatively affect a nation’s capacity to pursue FDI if existing and potential investors insinuate high debt burden associated with risks to economic growth, stability, macroeconomic disequilibrium and sustainability. However, other tenets underscore the positive and significant impact of external debt and foreign direct investment on fostering economic growth. The final perspectives insinuate the relationship between external debt and foreign direct investment may vary, exhibiting no clear relationship as it can be neutral, positive or non-linear against economic growth. This multifaceted landscape emphasises the intricate interactions of external debt-FDI-growth nexus, posing a challenging phenomenon that demands rigorous scholarly inquiry. This study will address the inconsistencies observed by using fresh panel data of six EAC economies from 1996 to 2023. The study will redirect the empirical literatures of foreign capital inflows and economic growth agendas. It will inspire further scientific attention dedicated to the critical assessment of the fundamental variables shaping the EAC growth framework. This research will delve on the Institutional Qualities that moderate the sustained impact of FDI-external debt on growth relationship of economies using Nonlinear Auto Regressive Distributed Lag (NARDL). The PMG and MG methodologies for panel data analysis will be used in validating robustness tests.