Foreign Direct Investment, Stock Market Development, and Inclusive Growth in Selected Sub-Saharan African Countries

Saint Kuttu, William Coffie (), Chimwemwe Chipeta () and Ekow Afedzie
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William Coffie: University of Ghana Business School
Chimwemwe Chipeta: University of the Witwatersrand
Ekow Afedzie: Ghana Stock Exchange

Chapter Chapter 29 in The Economics of Banking and Finance in Africa, 2022, pp 987-1012 from Palgrave Macmillan

Abstract: Abstract This paper examines the relationship between Foreign Direct Investment (FDI), Stock Market Development (SMD), and Inclusive Growth (IG) for 11 Sub-Saharan African countries for the period 1992 to 2019. We utilise dynamic panel data models using the Vector Error Correction Model (VECM) Granger causality framework and find that FDI has a positive effect on SMD. However, we do not find evidence suggesting that FDI and SMD exert a significant positive influence on IG. Also, IG, FDI, and SMD tend not to converge to their long-run equilibrium path in response to changes in any of the variables. However, the robustness tests estimated from panel models confirm the results from the VECM model. Also, the panel models show that human capital and the female labour force play a significant role in fostering IG. We further show that the availability of natural resources and domestic infrastructure attract FDI, while savings exert a significant negative influence on FDI.

Keywords: Foreign Direct Investment; Stock Market Development; Inclusive Growth; Africa (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-3-031-04162-4_29

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DOI: 10.1007/978-3-031-04162-4_29

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