Foreign direct investment - economic nexus: The role of the level of financial sector development in Africa

Abstract

This study examines the relationship between foreign direct investment (FDI) and economic growth considering the influence of financial sector development (FSD). We empirically determine the threshold level of three FSD indicators that would ensure the positive association between FDI and growth once these threshold levels are exceeded. The policy implication of this study is that policies directed towards attracting FDI should go along with and not precede policies that aim at promoting FSD.