Relationship Analysis Between FDI and Economic Growth in African Countries: Does Governance Quality Matter?

Foreign direct investment and economic growth in Arab countries: do institutions, financial development and human capital matter?

“…The rest of the variables have positive and significant effects only in the higher financial institutional quality regime. Our findings are similar to the results presented by and Labidi et al (2024), who found that the positive effect of foreign direct investment on economic growth begins to emerge when the quality of governance reaches a certain threshold. The findings are also in line with the results presented by Rodrik et al (2004), Daude and Stein (2007), and Guerin and Manzocchi (2009).…”

“…For this reason, we will concentrate in this section on studies that have examined the non-linear relationship between FDI and economic growth while investigating the influence of macroeconomic variables on the FDI-growth relationship. Labidi et al (2024) examine the non-linear empirical relationship between foreign direct investment and economic growth in the presence of governance quality in fifty-four African countries over the period 1996-2021. They found that the positive impact of foreign direct investment starts to manifest itself once the quality of governance reaches a certain threshold.…”

“…Their results also indicate that policies aimed at improving human capital and governance should not only increase the economic benefits of FDI in terms of growth but also mitigate the negative environmental impacts of FDI in the MENA region. Ochi et al (2024), through their study on a sample of 82 low-and middle-income developing countries between 1996 and 2022, find that the quality of institutions has a significant effect on inclusive growth. Ochi et al (2022) study the role of governance quality in economic growth for 54 African countries over the period 1996-2019.…”

“…This section defines the variables and principal components and summarizes the statistics for all the variables employed in the analysis. The choice of our variables has been previously proposed by studies such as Kalai et al (2024), Labidi et al (2024), , Guenichi and Omri (2024), Rajab and Zouheir (2023), Ochi et al (2024), Saidi et al (2022), Bajaj and Bhooshetty (2024), Fazaalloh (2024), Chebli and Saidi (2024), Taşdemir and Özçelik (2023), Ochi et al (2022) The endogenous variable employed in this study is economic growth. The aim of this research is to assess the effect of institutional quality, financial development, and human capital on the FDI-economic growth relationship.…”