Investment-growth nexus in West Africa: An assessment of whether fragility matter

Victor Ijirshar () and Jerome Andohol

International Review of Economics & Finance, 2022, vol. 81, issue C, 1-17

Abstract: This study examines the nexus between investment and growth in West Africa and further assesses whether fragility matters using a sample of 14 countries from 1986 to 2018. The study reveals that fragility, domestic investment, and foreign direct investment granger cause economic growth using the Granger non-causality test. Pooled Mean Group (PMG) estimator was utilised and the results show that fragility has a significant negative influence on the growth of West African countries. The study further reveals that fragility exerts a positive and significant influence on foreign direct investment unlike its effect on domestic investment in the long run. However, the findings reveal mixed effects of fragility on domestic investment in the short-run which connotes the “wait and see” attitude of investors in uncertain situations. The interactive effect of fragility and domestic investment retards the growth of West African countries unlike the interactive effect of fragility and foreign direct investment. The study recommends deliberate efforts by West African governments and the region's Commission body towards improving the growth trajectory by enhancing the institutional and human capacities, strengthening each of the nation's functional capacity to provide basic security within its territory, improving the transparency and accountability in governance, improving inclusive societal goals and societal development, and enhancing domestic investment.

Keywords: Economic growth; Domestic investment; Fragility; And foreign direct investment (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:81:y:2022:i:c:p:1-17

DOI: 10.1016/j.iref.2022.04.006

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