Foreign Aid on Economic Growth in Africa

Alemu, Aye Mengistu; Lee, Jin-Sang

doi:10.4324/9781315231365-2

Cited by 3 publications

(6 citation statements)

References 1 publication

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“…Another researcher [6] A study [9] revealed that FDI exerted an exogenous positive impact on economic growth. Further, FDI tended to have a larger impact on economic growth when there was sufficient absorptive capacity including R&D indicators and when occurring in technologically more advanced transition economies.…”

Section: Literature Reviewmentioning

confidence: 99%

Integration of GDP and FDI in Economies at Different Stages of Growth

Talwar¹,

Srivastava²

2018

TEL

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The objective of this study is to analyze the relationship between FDI and GDP for countries representing developed, developing and underdeveloped economies around the world. The countries identified for the purpose are Bhutan, Ethiopia, India, Brazil, USA and UK. Johansen cointegration test reveals that long-run equilibrium relationship between the two variables exists for Ethiopia, India and UK only. The VEC model shows no related short-run causality for any of these three countries. The study has implications in terms of policy decisions. Using FDI to boost GDP growth rate in the short-run is not an effective option for any country under the study. Since the vector error correction (VEC) model suggests that the two variables have a statistically significant adjustment mechanism for India, the study concludes that India can use FDI to leverage her long-term GDP. No evidence of link between the state of development of economy and integration of FDI and GDP is found by the study.

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Section: Literature Reviewmentioning

confidence: 99%

Integration of GDP and FDI in Economies at Different Stages of Growth

Talwar¹,

Srivastava²

2018

TEL

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“…A different researcherAlemu Alemu ((Alemu, 2017) used a dynamic GMM model to analyze the effects of foreign aid and FDI on economic growth in middle-and low-income African countries. The results showed that middle-income countries tended to experience more FDI impacts than low-income countries did.…”

Section: Fdi and Gdp Nexusmentioning

confidence: 99%

effect of FDI Net Inflow on the GDP growth rate: 1990-2021

Chike,

Oguanobi,

Mbamalu

et al. 2023

Journal of Multidisciplinary Academic and Practice Studies

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Purpose: This study examines the impact of foreign direct investment (FDI) on the gross domestic product (GDP) growth rate in Nigeria from 1990 to 2021. Research methodology: This study employed time-series data from the World Bank’s World Development Indicator Database to ensure data homogeneity. The data were assessed for stationarity using the ADF unit root test. All the data were stationary after the first difference. The hypothesis was tested using ordinary least squares (OLS) with BLUE properties. Results: The study finds a significant positive effect of foreign direct investment net inflow on GDPGR (p<.05). The control variables DEGO (p=0.3299) and INFL (p=0.3321) showed positive coefficients but were non-significant. Limitations: The study used only data from the Nigerian context, from 1990 to 2021, which affects the generalizability of the study findings to other countries in SSA, and a limited number of control variables, such as DEGO and INFL. Contribution: This study contributes to the literature on FDI’s impact of FDI on the economic growth of African nations. The research findings have critical policy implications for governments aiming to achieve sustainable economic growth. Practical Implications: This study has policy implications for developmental governance in Nigeria and SSA countries. Novelty: This study deviates from prior studies that agree that illicit financial flows in the form of FDI outflows negatively affect growth and focus on FDI net inflows’ beneficial impacts on the Nigerian economy.

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“…Foreign direct investment plays the role of directly increasing capital accumulation and indirectly increasing the stock of knowledge and fostering technological growth of a technologically inferior recipient economy (Borensztein et al 1998 . This, however, will depend on the absorptive capacity (of the host economy), which will enable an economy to benefit from foreign direct investment (Borensztein et al 1998, de Mello 1999, Durham 2004, Alemu 2017; '… a country with strong (weak) absorptive capacity will benefit maximally (minimally) from the growth effect of foreign direct investment' (Dada and 0.000 5000.000 10000.000 15000.000 20000.000 25000.000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Carkovic and Levine (2002), note that 'the macroeconomic findings on growth and FDI must be viewed sceptically.' Their concern is a lack of taking control of simultaneity bias, country-specific effects, and routine use of lagged dependent variables in growth regressions; these factors can bias estimates.…”

Section: Literature Reviewmentioning

confidence: 99%

“…They conclude that 'FDI does not only precede growth and output level of the country but also followed growth …' and recommend that 'The above results highlight the economic importance of FDI and provide new evidence for the case of African economies. ' Alemu (2017), disaggregates the African data into a panel of 20 middle-income and 19 low-income countries over 15 years between 1998 and 2013 and finds that middle-income African countries tend to have more impact on their economic growth from FDI. In his introduction section, he pinpoints weaknesses (that can be summarised as low absorptive capacity) of low-income countries in Africa.…”

Section: Literature Reviewmentioning

confidence: 99%

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Foreign Direct Investment and Economic Growth in the Southern African Development Community

GIBOGWE,

KUFUOR,

NIGO

2022

JAES

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The Southern African Development Community (SADC) has continued to experience an unprecedented increase in foreign direct investment (FDI) inflows for the past three decades. Evidence of their quantitative impact on the economy is still quite mixed. We use panel data methods on data from the (SADC) for the 1980–2020 period, where our results show that FDI has a positive and statistically significant effect on economic growth; thus, agreeing with some work that has been done on the community and in Sub-Saharan Africa. Our study calls for the development of human capital, the promotion of market liberalization, the improvement of the financial sector and the need for policy measures that prioritize productive investment that is supportive of the local private and foreign sectors; the latter provides positive spillovers to other sectors.

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Foreign Aid on Economic Growth in Africa

Cited by 3 publications

References 1 publication

Integration of GDP and FDI in Economies at Different Stages of Growth

Integration of GDP and FDI in Economies at Different Stages of Growth

effect of FDI Net Inflow on the GDP growth rate: 1990-2021

Foreign Direct Investment and Economic Growth in the Southern African Development Community

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