| Content | This paper uses annual balanced panel data to examine the Granger causal link
between foreign direct investment (FDI) and economic growth (measured by real GDP
growth) for 23 African countries covering the period from 1970 to 2011. Using recently
developed panel econometric techniques the present paper takes into account non-sta tionary and cross-section dependency in the dataset when analyzing the growth-FDI nexus.
The empirical results indicate two-way Granger causality link between FDI and economic
growth. Furthermore, we show that this causal link is not homogeneous among individual
countries in our sample. More specifically, we observe unidirectional causality from FDI to
GDP growth in Egypt, Gabon, and Mauritania, and from GDP growth to FDI in Coˆte
d’Ivoire, Kenya, South Africa and Zambia. Our main finding remains robust to estimation
between FDI as a fraction of gross capital formation and real GDP growth. |
