The Long‐run and Short‐run Effects of Foreign Direct Investment on Financial Development in African Countries

Njangang, Henri; Luc, Nembot Ndeffo; Nawo, Larissa

doi:10.1111/1467-8268.12379

Cited by 21 publications

(29 citation statements)

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“…[26] reveals that the growth enhancing and poverty alleviating impacts of FDI are greatly eroded by weak financial markets and political institutions that characterized poor nations. This finding is similar to those of [27]; [28] . While the prior study shows that FDI enhances welfare through the development of human capital, the latter argues that the financial markets development level is critical for foreign capital to drive poverty reduction.…”

Section: Empirical Review On Fdi and Poverty Nexussupporting

confidence: 90%

Impact of Foreign Direct Investment on Welfare in Africa: Empirical Evidence from Guinea

Keita

Baorong

2021

j. of econ. sci. res.

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The recent economic and financial hardship has resuscitated controversies over the role of Foreign Capital in economic growth and welfare enhancement in emerging nations, particularly in Guinea. The literature that scrutinizes the causal interaction among FDI and poverty alleviation is relatively abundant, the fundamental statement shared by these empirical studies is that GDP growth is assumed to be relevant proxy of people well-being. However, Guinea and its FDI attraction policies have not been well approached by some of these paper. This empirical study examines the interaction between FDI inflows and poverty alleviation in Guinea from 1990 to 2017. The Human Development Index (HDI) and the per capita FDI net inflows are respectively employed as key welfare and FDI indicators.The findings from the Error Correction Model (ECM) confirm that, in the long term the variables converge in the same direction. The outcomes also exhibit that per capita FDI in the long run, negatively impacts welfare but not significantly, while Inflation’s coefficient remains positive and significant. With trade openness, we still found the same positive interaction but not significant. The results from the Auto Regressive Distributed Lag Model (ARDL) exhibit that per capita FDI flows [current value and L2.] have positive but not significant impact on HDI whereas FDI [L1] has a negative interaction with welfare at 10% significance level. The trade openness variable [current value] is negatively but not significantly associated with HDI, while inflation [L1 and L2] influence on human advancement is positive and significant.Overall, Foreign direct investment in Guinea is still resource seeking investment which impact on the domestic economy is very limited. Hence, government should introduce new policies and incentives in order to attract more market seeking or other types of FDI that may promote inclusive growth and alleviate poverty.

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Section: Empirical Review On Fdi and Poverty Nexussupporting

confidence: 90%

Impact of Foreign Direct Investment on Welfare in Africa: Empirical Evidence from Guinea

Keita

Baorong

2021

j. of econ. sci. res.

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“…On the other hand, the results show an insignificant short run effect of FDI on the economic growth of Egypt which can be supported by (Henri et al, 2018;and Aga, 2014). Nguyen (2017) reached the same results where a significant long run relationship exists between FDI and economic growth, while an insignificant relationship is found to be in the short run.…”

Section: Vector Error Correction Model (Vecm)mentioning

confidence: 78%

The Impact of Foreign Direct Investment on the Economic Growth of Egypt (1980-2018)

Alaa¹,

Ashraf²,

Elsherif³

2021

IJEFI

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Many developments had occurred in the global economy. Among these developments is the increase of capital flows across countries. Foreign direct investment (FDI) is considered to be one of the cross border capital flows that countries use in order to enhance their economic growth. This study focuses on how FDI impacts the economic growth of Egypt for a period from 1980 to 2018. The study applies Johansen co-integration, Vector Error Correction Model (VECM) and Ganger causality in the methodology. Johansen co-integration results show that a long run relationship exists among the variables. In addition, VECM shows that FDI exerts a positive significant impact on the economic growth of Egypt. Finally, a bidirectional causality between FDI and the economic growth of Egypt is shown by Granger causality.

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“…In this paper, we use two financial development indicators, namely: domestic credit to the private sector as a percentage of GDP (credit) and Broad money as a percentage of GDP (M2/GDP). These two financial development indicators are chosen according to financial literature on Africa, as the financial sector in most African countries is dominated by the bank sector (Henri, Luc, & Larissa, 2019). These variables are gathered from the World Bank's World Development Indicators (WDI).…”

Section: Methodsmentioning

confidence: 99%

Does financial development reduce the size of the informal economy in sub‐Saharan African countries?

Njangang

Nembot

Ngameni

2020

African Development Review

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This paper contributes to the understanding of the other neglected effects of financial development by investigating the relationship between financial development and the size of the informal economy using an unbalanced panel data of 41 Sub Saharan African countries over the period 1991-2015. Empirical evidence is based on Ordinary Least Squared, Fixed effects and system Generalized Method of moment. The results show that financial development measured by broad money and domestic credit to private sector have a negative and statistically significant effect on the informal economy. This clearly suggests that financial development reduces the size of the informal economy.

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The Long‐run and Short‐run Effects of Foreign Direct Investment on Financial Development in African Countries

Cited by 21 publications

References 50 publications

Impact of Foreign Direct Investment on Welfare in Africa: Empirical Evidence from Guinea

Impact of Foreign Direct Investment on Welfare in Africa: Empirical Evidence from Guinea

The Impact of Foreign Direct Investment on the Economic Growth of Egypt (1980-2018)

Does financial development reduce the size of the informal economy in sub‐Saharan African countries?

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