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The Impact of COVID-19 on the Relationship between Foreign Direct Investment and Sustainable Development

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Abstract

This study measures the role of COVID-19 on the nexus between FDI and sustainable development in SSA. The empirical analysis relies on a panel data from 38 SSA countries, covering 2000 – 2022. The findings suggest that during this period, FDI minimally effected economic growth and development. Specifically, FDI does not have a significant impact on sustainable development in the linear estimates, and a negative effect in the non-linear estimates. When the effect of FDI is further analysed on economic growth, the environment, and human development, the estimates remain consistent. While COVID-19 reduces the levels of economic growth, the environment, human development, and sustainable development, the moderating effect shows that FDI reduces the negative effect of COVID-19 on economic growth and sustainable development. Finally, it is observed that rule of law promotes sustainable development; financial development does not exert a significant connection with sustainable development, and negatively affects economic growth and human development, yet the interaction effects of economic growth and financial development on sustainable development is statistically insignificant. Appropriate policies are discussed.

Suggested Citation

  • Waliu O. Shittu & Gazi M. Hassan & Frank G. Scrimgeour, 2023. "The Impact of COVID-19 on the Relationship between Foreign Direct Investment and Sustainable Development," Working Papers in Economics 23/08, University of Waikato.
    • Handle: RePEc:wai:econwp:23/08
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    More about this item

    Keywords

    foreign direct investment; sustainable development; corona virus; instrumental variables regression;
    All these keywords.

    JEL classification:

    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development

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