Foreign Direct Investment and Domestic Private Investment in Sub-Saharan African Countries: Crowding-In or Out ?

Askandarou Diallo,, Luc Jacolin and Isabelle Rabaud ()

Working papers from Banque de France

Abstract: This paper investigates the relationship between FDI and private investment in Sub-Saharan Africa (SSA), using a sample of 40 countries over 1980-2017. To disentangle short term from long-term dynamics, our empirical analysis is based on Pooled Mean Group (PMG), Mean Group (MG) and Dynamic Full Effects (DFE) models. We find that FDI has little effect on private investment in the short run but significant crowding-in effects in the long-run: a one percentage point increase of the share of FDI in GDP leads to a 0.29% rise in private investment, in the long run. Our results also show that FDI interacts with public domestic investment to boost these positive effects. Finally, we show that the impact of FDI on domestic private investment is stronger in non-natural resource exporting diversified countries as opposed to non-diversified commodity exporters.

Keywords: Financial Development; Domestic Investment; FDI; Crowding-in/Crowding-out Effects. (search for similar items in EconPapers)
JEL-codes: G11 O11 O16 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2021
New Economics Papers: this item is included in nep-afr, nep-int, nep-isf and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://publications.banque-france.fr/sites/defaul ... ocuments/wp816_0.pdf

Related works:
Working Paper: Foreign direct investment and domestic private investment in Sub-Saharan African countries: crowding-in or out? (2021)
Working Paper: Foreign direct investment and domestic private investment in Sub-Saharan African countries: crowding-in or out? (2021)
Working Paper: Foreign direct investment and domestic private investment in Sub-Saharan African countries: crowding-in or out? (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:816

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