Relationship Analysis Between FDI and Economic Growth in African Countries: Does Governance Quality Matter?

Mohamed Ali Labidi (), Anis Ochi () and Yosra Saidi ()
Additional contact information
Mohamed Ali Labidi: University of Carthage
Anis Ochi: University of Jendouba
Yosra Saidi: University of Jendouba

Journal of the Knowledge Economy, 2024, vol. 15, issue 4, No 39, 16540 pages

Abstract: Abstract The present study contributes to the previous literature by analyzing the nonlinear empirical linkage between the foreign direct investment and economic growth in the presence of governance quality. The main objective of this paper is to determine the threshold level of governance quality, which, once attained, will induce the positive impact of foreign direct investment on economic growth. In order to explore the non-linear triangular relationship among these three macroeconomic variables, this study applies a dynamic threshold panel data framework and considers global governance index as the threshold variable. The dataset is a balanced panel of fifty-four African countries considered over 1996 and 2021. We have showed that there is a non-linearity between growth and foreign direct investment depending on the level of governance quality. It was proved too that the positive effect of foreign direct investment begins to manifest itself once governance quality reaches some threshold level, which turns out to be above the levels of governance quality of most African countries. Later, we use the dynamic panel methodology to study the role of governance indicators as determinants of FDI inflows. Our findings reveal that not all indicators of governance quality have a significant effect on foreign investors’ decisions in African countries. In light of obtained results, policy implications are discussed.

Keywords: Foreign direct investment; Governance; Economic growth; Dynamic threshold model; African countries (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s13132-023-01710-1 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:jknowl:v:15:y:2024:i:4:d:10.1007_s13132-023-01710-1

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/13132

DOI: 10.1007/s13132-023-01710-1

Access Statistics for this article

Journal of the Knowledge Economy is currently edited by Elias G. Carayannis

More articles in Journal of the Knowledge Economy from Springer, Portland International Center for Management of Engineering and Technology (PICMET)
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().