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Effect of Foreign Direct Investment on Economic Growth in Ecowas Countries

Author

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  • Wycliffe Mugun

    (Department of Economics, Kaimosi Friends University, Kaimosi, Kenya.)

Abstract

The main objective of the study was to examine the effect of foreign direct investment on economic growth in ECOWAS countries. The null hypothesis stated that foreign direct investment does not affect economic growth in ECOWAS countries. Foreign direct investment is regarded as a substantial facilitator of economic growth. The endogenous growth model maintains that FDI has a significant impact on improving human capital, managerial skills, and research and development, which in turn improve economic growth. However, because studies on foreign direct investment and economic growth have reported divergent findings, it remains unclear whether foreign direct investment affects economic growth in the selected ECOWAS countries. The study used World Bank data for a panel of 10 countries from 2005 to 2024. The study was anchored in the endogenous growth model and employed a correlational research design. The Hausman specification test was employed to ascertain whether the fixed-effects or random-effects model should be used for estimation. The fixed-effects regression results indicated that the natural logarithm of foreign direct investment had a positive and significant effect on the natural logarithm of economic growth at the one per cent level. The study concluded that FDI in the ECOWAS region plays a significant role in accelerating growth, although several limitations hamper its stimulation and expansion. The study recommends that ECOWAS countries accelerate economic growth through enhanced regional integration to attract market-seeking FDI.

Suggested Citation

  • Wycliffe Mugun, 2026. "Effect of Foreign Direct Investment on Economic Growth in Ecowas Countries," Post-Print hal-05731151, HAL.
    • Handle: RePEc:hal:journl:hal-05731151
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