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Foreign Direct Investment and Inclusive Green Growth in Africa: Energy Efficiency Contingencies and Thresholds

Isaac Ofori (), Emmanuel Gbolonyo () and Nathanael Ojong ()
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Isaac Ofori: University of Insubria, Varese, Italy
Emmanuel Gbolonyo: University of Cape Town, South Africa
Nathanael Ojong: York University,Toronto, Canada

No 22/089, Working Papers from European Xtramile Centre of African Studies (EXCAS)

Abstract: Despite the growing number of empirical studies on foreign direct investment (FDI) and energy efficiency (EE) as they relate to green growth, there remains an empirical research gap with respect to whether EE can engender positive synergy with FDI to foster inclusive green growth (IGG) in Africa. Also, little has been done to show the IGG gains from improving EE in both the short and long terms. Thus, this paper aims to investigate whether there exists a relevant synergy between EE and FDI in fostering IGG in Africa by using macrodata for 23 countries from 2000 to 2020. According to our findings, which are based on dynamic GMM estimator, FDI hampers IGG in Africa, while EE fosters IGG. Notably, in the presence of EE, the environmental-quality-deterioration effect of FDI is reduced. Additional evidence by way of threshold analysis indicates that improving EE in Africa generates positive sustainable development gains in both the short and long terms. This study suggests that a country’s drive to attract FDI needs to be accompanied by appropriate policy options to promote energy efficiency.

Keywords: Africa; Energy efficiency; FDI; Inclusive Green Growth; Greenhouse Gases; Environmental Sustainability (search for similar items in EconPapers)
JEL-codes: F2 F21 O11 O44 O55 Q01 Q43 Q56 (search for similar items in EconPapers)
Pages: 60
Date: 2022-01
New Economics Papers: this item is included in nep-ene, nep-env and nep-int
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Forthcoming: Energy Economics

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