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This paper investigates the link between foreign direct investment (FDI), democracy and economic growth on a panel of eight Southern African countries for 1980-2014 using the system generalized method-of-moment (GMM) estimator. We find that FDI has a direct positive effect on economic growth and that strong democratic institutions are a significant driver of economic growth in the sample countries. The impact of FDI on economic growth is dependent on the level of democracy in the host countries. This implies that countries with strong democratic institutions are better able to absorb the positive spillovers from FDI. In policy terms, Southern African countries should sustain the institutional reform policy agenda already in place in order to benefit more from the significant inflows of FDI. [ABSTRACT FROM AUTHOR]

This paper analyzed drivers of foreign direct investments (FDI) to West Africa using a panel dataset from 1970 to 2010. OLS and GMM techniques are used for the estimations. The main results indicate that there is a U-shaped relationship between economic development and FDI inflows to West Africa. In summary: (i) The quadratic element of real per capita GDP, domestic investment, trade openness, first year lag of FDI, natural resources (oil and metals) endowment and exports, and monetary integration have positive and significant effect on FDI inflows to West Africa; and (ii) there is a negative relationship between FDI inflows to the sub-region and loan component of ODA, economic growth, level of economic development (real GDP per capita), life expectancy, and domestic credit to the private sector. [ABSTRACT FROM AUTHOR]

Empirical studies on international trade highlight the role of innovation on international exchange but do not capture the effect of technological innovation when unobservable common factors (UCFs) are considered. This paper examines the long‐run relationship between technological innovation and international exchange using panel data for eight African countries over the period 1981–2013. The non‐stationarity and cointegration between technological innovation, international exchange, public investment, real gross domestic income and foreign direct investment were examined, controlling for cross‐sectional dependence and heterogeneity between countries. The results suggest that technological innovation in Africa remains low after controlling for UCFs, while public investment, real gross domestic product and foreign direct investment have significant impact on international exchange. Moreover, the results from the homogeneous and heterogeneous estimates, with and without UCFs, show that ignoring UCFs is likely to bias the coefficients. These findings reveal that African countries should invest more in public infrastructures and research and development to upgrade their capability To play an active role in the international market. [ABSTRACT FROM AUTHOR]

Abstract: This paper studies the role played by the quality of property rights in the linkages of international capital flows into sub‐Saharan African (SSA) economies. Using panel data of 36 SSA countries over the period 1996–2015 and the ARDL procedure with the Pooled Mean Group regression method appropriate for non‐stationary panel data estimation, we account for the joint effects of property rights quality and openness to foreign capital flows on economic growth. We uncover the existence of a property rights quality threshold beyond which property rights either amplifies the spillovers effects or attenuates the negative effect of capital flows on economic growth. For instance, it takes a level of property rights of at least 60 to have a positive long‐term impact of capital flows on economic growth in natural resource‐poor African countries. The quality of property rights matters more to obtain spillover effects of capital flows on growth in natural resource‐poor countries than in their peer natural resource‐rich countries. Finally, with regard to the countries' income levels, capital flows have significant long‐term spillovers effects on economic growth in advanced African economies than in their low‐income peers. [ABSTRACT FROM AUTHOR]

This paper uses the bias-corrected least-squares dummy variable (LSDV) estimator to examine the relationship between economic growth and four different types of private capital inflows (cross-border bank lending, foreign direct investment (FDI), bonds flows and portfolio equity flows) on a sample of 15 selected sub-Saharan African countries over the period 1980–2008. Our results show that FDI and cross-border bank lending exert a significant and positive impact on sub-Saharan Africa's growth, whereas portfolio equity flows and bonds flows have no growth impact. Our estimates suggest that a drop by 10 per cent in FDI inflows may lead to a 3 per cent decrease of income per capita growth in sub-Saharan Africa, and a 10 per cent decrease in cross-border bank lending may reduce growth by up to 1.5 per cent. Therefore, the global financial crisis is likely to have an important effect on sub-Saharan Africa's growth through the private capital inflows channel. [ABSTRACT FROM AUTHOR]

This paper examines the trend, constraints, promotion, and prospects of investment – domestic investment, foreign direct investment, and private portfolio investment – in Africa. After identifying the importance of investment in Africa's economic development, it was shown that all forms of investment are low in Africa and hence inadequate for the attainment of the MDGs and poverty reduction in the continent. The constraining factors include: low resources mobilization; high degree of uncertainty; poor governance, corruption, and low human capital development; unfavorable regulatory environment and poor infrastructure, small individual country sizes; high dependence on primary commodities exports and increased competition; poor image abroad; shortage of foreign exchange and the burden of huge domestic and external debt; and undeveloped capital markets, their high volatility, and home bias by foreign investors. The paper recommends that successful promotion of both domestic, foreign direct and portfolio investment in Africa will require actions and measures at the national, regional, and international levels. It concludes that the prospects are bright. New and attractive investment opportunities are emerging in infrastructure, particularly as most African countries now encourage public/private partnerships for investments in this sector. In addition to privatization, renewed interest within Africa in undertaking regionally based projects and joint exploitation of natural resources is creating other investment opportunities. Apart from the fact that investment in Africa yields the highest returns, investment risk in the continent is declining. In addition, much progress has been made in recent years to improve the investment climate in Africa. All this is of course is not to deny that obstacles do remain hence economic reforms to enhance domestic investment would need to be complemented by measures to attract increased foreign capital. Critical in such endeavors must be efforts to improve governance in some countries as well as to eliminate socio-political violence in others and development of domestic capital markets, while government institutions must be modernized and upgraded. [ABSTRACT FROM AUTHOR]

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This article investigates the causal interactions between foreign direct investment (FDI), economic freedom and economic growth on a panel of four North African countries (Tunisia, Morocco, Algeria and Egypt), over a 5-year period from 1980 to 2013. Using the System Generalized Method of Moments (GMM) in a panel data analysis, we found strong evidence of a positive link between FDI and economic growth. We also found that economic freedom appears to be working as a complement to FDI and that the effect of FDI is more pronounced in the presence of the economic freedom variable. This means that the countries which promote greater freedom of economic activities benefit more from the presence of multinational corporations (MNCs). [ABSTRACT FROM AUTHOR]

This study examined the interactive impact of armed conflicts on FDI flows into Africa. A dataset involving 41 African countries and a dynamic system GMM model were adopted. The findings showed that conflict had a significant negative effect on FDIs; and that infrastructural development significantly moderated the impact of conflicts. The study also revealed that the impact of conflict was higher for natural resource-rich countries than for non-resource-rich countries, and that the impact was both regional and seasonal sensitive. The findings suggest that rebuilding conflict-induced infrastructure destructions can play significant role in attracting FDIs even in conflict-prone countries of Africa. [ABSTRACT FROM AUTHOR]

In theory, private capital flows (PCF) augment domestic capital for economic growth. In sub-Saharan African (SSA) economies, foreign direct investment per capita (FDIC), portfolio investment per capita (PIC) and bank lending per capita (BLC) components of PCF grew inversely to gross domestic product per capita (GDPC). Previous studies have attributed this problem largely to recipient economies' structural features, with little attention paid to PCF shocks (sharp fluctuations from the equilibrium path). Employing annual data on 14 SSA countries from 1990 to 2013, this study estimated a neoclassical growth model to evaluate the effects of PCF shocks on the SSA countries' economic output and growth. The results showed that private capital flows positively affected economic output and growth, as hypothesized in theory. The effects of PCF shocks were negative, however, and are thus culpable for poor response of the region's economic performance to inflows of private capital. [ABSTRACT FROM AUTHOR]

The study examines the links between Nigerian economic growth, employment and foreign direct investment (FDI) in the manufacturing and servicing sectors between 1990 and 2009. The significant results of the Johansen cointegration technique and the vector error correction model reveal that FDI in the servicing sector has a positive relationship with economic growth while FDI in the manufacturing sector has a negative relationship. FDI in the manufacturing sector has a positive relationship with employment rate while FDI in the servicing sector has a negative relationship with employment rate. Granger causal relationships among these variables exist. In the growth equation, causality runs from growth to FDI in the service sector while growth and FDI in the manufacturing sector have bidirectional causal effect. For the employment equation, unidirectional causality runs from FDI in the service and manufacturing sectors to employment rate. [ABSTRACT FROM AUTHOR]