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Assessing Foreign Direct Investment Long-Run Contribution to Financial Development: Evidence from Namibia

Veundjua Muruko-Jaezuruka () and Prashant Gupta ()
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Veundjua Muruko-Jaezuruka: Coventry Business School, Coventry University
Prashant Gupta: Brunel University London

Economics Bulletin, 2020, vol. 40, issue 4, 3111-3123

Abstract: Abstract We investigate the impact of Foreign Direct Investment on financial development using Domestic Credit to the Private Sector and Private Credit by Deposit money banks as a broader measure of financial indicators. We use the autoregressive distributed lag bounds co-integration analysis for long-run estimation on the Namibia economy as a case study for the periods 1990 to 2017. The Error Correction Model and the Granger causality approach are further used to examine the short-run dynamics and the direction of causality. Our results confirm the presence of a long-run association between FDI and financial development along with economic growth and human capital, the existence of uni-directional causal association from FDI to financial development measured in terms of domestic credit to the private sector, and bi-directional causation when measured in terms of private credit by deposit money banks. We conclude that FDI benefits Namibia financial system whilst playing a critical role in promoting human capital and economic development. Keywords: Foreign Direct Investment, Financial Development, Economic Growth, Human Capital, ARDL bounds, Granger Causality

Keywords: Foreign Direct Investment; Financial Development; Economic Growth; Human Capital; ARDL bounds; Granger Causality (search for similar items in EconPapers)
JEL-codes: C3 E4 (search for similar items in EconPapers)
Date: 2020-11-25
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