Nexus Between FDI, ODA and Economic Growth in Developing African Countries: A Systems Approach

Francois Cornelius Wehncke (), Patricia Lindelwa Makoni () and Godfrey Marozva ()
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Francois Cornelius Wehncke: Department of Finance, Risk Management and Banking, University of South Africa, Pretoria, South Africa
Patricia Lindelwa Makoni: Department of Finance, Risk Management and Banking, University of South Africa, Pretoria, South Africa
Godfrey Marozva: Department of Finance, Risk Management and Banking, University of South Africa, Pretoria, South Africa

Economic Research Guardian, 2022, vol. 12, issue 2, 97-114

Abstract: The aim of this paper is to investigate the deterministic relationships between foreign direct investment, official development assistance and economic growth for a selection of 20 African countries, under dynamic economic circumstances, over nineteen years presented by the periods before, during, and after the global financial crisis (2000-2018; 2000-2006; 2007-2010; 2011-2018) within the African context. We adopted the two-step system GMM model as an estimation technique to analyze economic data sourced from the World Bank’s WDI database. We found that an encouraging positive deterministic relationship exists between FDI and economic growth in all the time periods (2000-2018) and for each individual period (2000-2006; 2011-2018) for the sampled countries. However, there is a discouraging and negative deterministic link between FDI and economic growth during the global financial crisis (2007-2010) period. Further, no significant deterministic relationship exists between ODA and economic growth for the periods and countries under review. Based on our findings, we recommend that African countries should design investment strategies, favorable to both local and foreign investors and to move away from official development aid reliance.

Keywords: Economic Growth; Foreign Direct Investment; Official Development Assistance; Africa (search for similar items in EconPapers)
JEL-codes: F21 F35 G20 O55 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:wei:journl:v:12:y:2022:i:2:p:97-114

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