Foreign direct investment and economic growth in Mauritius: Evidence from bounds test cointegration

Blin, Myriam; Ouattara, Bazoumana

doi:10.3917/ecoi.117.0047

Cited by 12 publications

(6 citation statements)

References 19 publications

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“…The long-run relationship shows that, ceteris paribus, a 10 percent increase in the ratio of inward FDI to host GDP is associated with higher GDP per capita growth of about 2.43 percent in countries (on average). Our finding of a strong positive association between FDI inflows and economic growth is consistent with the findings of De Mello (1999), Blin and Ouattara (2009), Pegkas (2015), among others.…”

Section: Bounds Testing For Cointegration Resultssupporting

confidence: 92%

Public debt, foreign direct investment and economic growth dynamics

Onafowora

Owoye

2019

IJOEM

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Purpose The purpose of this paper is to examine the dynamic and long-run relationships among public debt, FDI and output growth in five individual Caribbean countries over the period 1975–2015. Design/methodology/approach Zivot and Andrews (1992) unit root test with structural break is used to examine the stationarity of the variables and then the autoregressive distributed lag bounds testing procedure is used to ascertain existence of cointegration among them. Finally, order-invariant generalized forecast error variance decomposition (GFEVD) is used to establish the strength of the causal relationship between the examined variables. Findings The results confirm that the examined variables are cointegrated. FDI, domestic investment, trade openness, human capital (HC) and institutional quality were found to have significantly positive effects on economic growth, while higher public debt and inflation rates hampered growth. GFEVD revealed unidirectional Granger causality running from FDI to economic growth in two countries; unidirectional causality from growth to FDI in two other countries; and bidirectional causality between growth and FDI in one other country. The results also indicate one-way causality from output growth to public debt in three countries and bidirectional causality between these two variables in two other countries. Practical implications The implication is that the Caribbean Governments may need to adopt effective debt management as a major policy and intensify efforts at utilizing loans obtained judiciously for human and capital projects that have direct positive net present value but, to secure strong and inclusive growth, these strategies must be linked to policies that enhance macroeconomic stability and the quality of their institutions, encourage capital inflows and domestic investments vis-à-vis domestic savings, and increase HC and trade earnings. Originality/value In contrast to extant studies of the public debt–FDI–output growth nexus, this study controls for the possibility of structural breaks in unit root tests along with performing bounds test for cointegration, variance decomposition analysis, Granger causality tests, and CUSUM and CUSUMSQ tests for the stability of the dynamic output growth model. This is a unique contribution to the existing literature, and highlights the originality value of this paper.

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Section: Bounds Testing For Cointegration Resultssupporting

confidence: 92%

Public debt, foreign direct investment and economic growth dynamics

Onafowora

Owoye

2019

IJOEM

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“…Middle path theory encourages a mixture of regulations and openness. The host economy should pursue strategies that attract FDI but also put in place strategies and policies that reduce the negative effect of FDI on the host economy (Blin & Ouattara, [14] [16]. Further, endogenous growth theories recognize the significance of FDI level on growth via capital development and technology spillover [4,5].…”

Section: Theoretical Reviewmentioning

confidence: 99%

“…Blin & Ouattara [14] 1975-2000 for Mauritius ARDL An increase in FDI leads to an increase in economic growth Mamingi & Kareem [18] 1988-2013 for Caribbean states GMM FDI is not significant Sarker & Khan [19] 1972-2017 for Bangladesh ARDL An increase in FDI leads to an increase in economic growth Wiredu et al [20] 1998-2017 for Côte d'Ivoire, Ghana, Nigeria, and Senegal OLS FDI has a negative effect on economic growth Odhiambo (2022) 1980-2018 for African states ARDL An increase in FDI leads to an increase in economic growth Ofori & Asongu [5] 1990-2020 for Sub-Saharan African states GMM An increase in FDI leads to an increase in economic growth Benetrix et al [1] 1990-2009 for Developed and developing states OLS An increase in FDI leads to an increase in economic growth Mawutor et al [21] 1980-2018 for Ghana ARDL FDI has a negative effect on economic growth Okello & Badj [9] 1970-2019 for Kenya OLS FDI is not significant…”

Section: Author (S)mentioning

confidence: 99%

Foreign Direct Investment and Economic Growth in Kenya: A Comprehensive Analysis

Mose,

Kipchirchir

2024

AJEBA

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The study investigates the relationship between foreign direct investment (FDI) and economic growth in Kenya through comprehensive regression analysis and causality tests. Theoretical literature argues that FDI inflow can transfer great advantages to the host country, however, empirical studies show that the benefits of FDI vary greatly across countries. Kenya has traditionally been one of the largest recipients of FDI in Africa, foreign investors provide intangible assets to support the operation of the domestic firms. However, recently Kenya has experienced dwindling FDI levels. Despite an increasing empirical focus on the relationship between foreign inflow and the economy, little is known about the role of FDI in this nexus in Kenya. The study investigated the contribution of foreign direct investment to economic growth in Kenya using an Autoregressive Distributed Lag (ARDL) regression approach and causality tests. Secondary time series data for Kenya were used during empirical analysis. The time series data is from 1990 to 2021. The findings indicate that increasing FDI inflow will lead to an increase in economic growth. Additionally, the result indicates trade openness and climate change matter from a growth perspective. Notably, the results show that short-run to long-run foreign direct investment kindles economic growth in Kenya. Accordingly, Kenya must have more effective FDI strategies and pursue macroeconomic policies that attract FDI into the country, offers investor friendly environment, reduces bureaucratic hurdles and addresses the challenges of accumulating domestic investment and foreign exchange, particularly by productively opening the market and allowing FDI inflow to boost investment accumulation and economic growth.

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“…Human capital refers to the level of a country's workforce and it is important for growth (Benhabib & Spiegel, 1994;Curwin & Mahutga, 2014). Inflation can create uncertainty about macroeconomic conditions, which tends to reduce the rate of investment (Blin & Ouattara, 2009;Kotrajaras, 2010). The volatility of exchange rate generates uncertainty about the profitability of international trade and investment, causing a reduction in their levels and affecting growth (Anwar & Nguyen, 2010;MacDonald, 2000).…”

Section: Other Variablesmentioning

confidence: 99%

FDI inflows and economic growth in Arab region: The institutional quality channel

Aziz

2020

Int. J Fin Econ

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This study empirically investigates the possible role of institutional quality in absorbing foreign direct investment (FDI) flows' spillovers for growth in a group of Arab countries. The analysis is performed by employing system GMM estimation in panel data comprising 11 Arab countries over the period 1988-2012. It develops overall indexes of doing business and economic freedom indicators using the principal components analysis (PCA) as weights. The study finds that the quality of institutions plays an important role in enhancing economic growth via indirect impact by absorbing spillovers of FDI inflows.On the one hand, the study reveals that greater macroeconomic stability and financial development have a positive influence on growth. The results of this study have several implications for policy makers.

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Foreign direct investment and economic growth in Mauritius: Evidence from bounds test cointegration

Cited by 12 publications

References 19 publications

Public debt, foreign direct investment and economic growth dynamics

Public debt, foreign direct investment and economic growth dynamics

Foreign Direct Investment and Economic Growth in Kenya: A Comprehensive Analysis

FDI inflows and economic growth in Arab region: The institutional quality channel

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