The FDI-Growth Nexus: A Comparative Analysis of Resource-Rich and Resource-Scarce African Economies
Date
2022-07
Authors
Yimer, Addis
Journal Title
Journal ISSN
Volume Title
Publisher
African Economic Research Consortium
Abstract
In an attempt to capture the impact that cross-country resource endowment
differences may have on the FDI‒growth relationship, this study investigates the
FDI‒growth nexus in Africa by categorizing the countries as resource-rich and resource scarce, for the period 2000‒2017. Thus, the study is a modest attempt to answer the
following main questions: a) Do FDI inflows contribute to economic growth in the host
country after controlling for endogeneity? b) Does being a natural resource-abundant/
scarce country alter the FDI‒growth nexus? Using a System GMM, both the direct and
interaction effects of FDI on growth are investigated in a comparative framework across
resource-rich and resource-scarce African countries. The results show that the effects
of FDI on economic growth vary depending on resource richness of countries. While
FDI is found to affect growth positively and significantly in resource-scarce African
economies, no significant effect of FDI on growth is identified for the resource-rich
category.
Description
Keywords
Africa; Economic growth; FDI; Resource-rich; Resource-scarce; System GMM