Foreign Direct Investment & Economic Growth in Sub-Saharan Africa: An Empirical Study

Abstract

This study has made an attempt to investigate and analyze empirically the impact of Foreign Direct Investment (FDI) on the economic growth for a panel of 32 Sub-Saharan African countries during the period 2008-2014. Both static panel regression techniques and dynamic panel estimates were employed to assess the causal link of our regressors, namely, FDI, trade openness, domestic investment, working population size and the effects of the 2009 European debt crisis on our dependent variable, Gross Domestic Product (GDP) per capita. The evidence from the statistical analysis suggests that aggregated FDI does have a positive and significant impact on economic growth and is thus consistent with the literature, especially with respect to developing countries. Based on static random effects, the inclusion of the 2009 Euro zone crisis did not diverge the results despite its negative impact on economic growth. The contribution of FDI is observed to be relatively higher than domestic investment.