Do Capital Inflows and Financial Development, Influence Economic Growth in West Africa? Further Evidence from Transmission Mechanisms

Anthony Orji, Jonathan E. Ogbuabor, Chiamaka F. Okolomike and Onyinye Anthony-Orji
Additional contact information
Anthony Orji: University of Nigeria, Nigeria
Jonathan E. Ogbuabor: University of Nigeria, Nigeria
Chiamaka F. Okolomike: University of Nigeria, Nigeria
Authors registered in the RePEc Author Service: Anthony Orji

Econometric Research in Finance, 2022, vol. 7, issue 1, 71-94

Abstract: This study investigates the channels through which shocks from foreign capital inflows and financial development are transmitted to economic growth in the ECOWAS region using quarterly data for the period between 2000 and 2017. The work adopted the panel vector autoregressive (pVAR) model in a generalized method of moments (GMM) framework to actualize its objective. The empirical results show that foreign direct investment (FDI), net domestic credit (CRE), and economic growth (ECG) all have significant relationships with each other, while gross capital formation (GCF), labour force (LF), and foreign aid (AID) have significant relationships with FDI, CRE and ECG. Furthermore, FDI and CRE have negative relationship with economic growth in the short run but have positive impulse response functions with economic growth in the long run. FDI and CRE exhibit positive relationship between themselves in the short run and negative relationship in the long run. Thus, the study recommends concerned policy makers to pursue financial deepening and enact credible policies that strengthen the financial system. In addition, a conducive socio-economic environment should be actively maintained so as to attract the required foreign capital inflows. Finally, more efforts should be made towards the establishment of a single monetary union, as it is likely to further strengthen the region and improve the trade among the member-countries. This should lead to further growth within the region.

Keywords: Foreign Capital Inflows; Financial Development; Investment; Economic Growth; ECOWAS (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.erfin.org/journal/index.php/erfin/article/view/159/63 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sgh:erfinj:v:7:y:2022:i:1:p:71-94

DOI: 10.2478/erfin-2022-0002

Access Statistics for this article

Econometric Research in Finance is currently edited by Dobromił Serwa and Piotr Wdowiński

More articles in Econometric Research in Finance from SGH Warsaw School of Economics, Collegium of Economic Analysis Contact information at EDIRC.
Bibliographic data for series maintained by Dobromił Serwa ().