Foreign Direct Investment, Exports and Economic Growth: Some African Evidence

This paper analyses the relationships among foreign direct investment, exports and economic growth in 12 selected sub-Saharan African countries over the period 1970 to 2013. The multivariate co-integration approach of Johansen was applied and the results suggest that the three variables are co-integrated in ten countries. Economic growth has a positive long-run effect on FDI in five countries and exports are positively related to FDI in four countries. The results of Granger causality tests are also mixed across countries. The results reveal a short-run bidirectional causality between FDI and GDP and unidirectional causality running from GDP to exports in Ghana. Bidirectional causality exists between FDI and exports in Benin. GDP causes exports in Benin, Congo Democratic and Gabon. FDI causes exports in Cote d'Ivoire and Kenya. In the long-run, both GDP and exports cause FDI in Benin, Burkina Faso, Gabon and Senegal. Bidirectional causality exists between FDI and GDP in Cameroon, Cote d'Ivoire and South Africa, and between FDI, GDP and exports in Congo Democratic. There is bidirectional causality between GDP and exports in Ghana, and between FDI and exports in Kenya. Overall, the results provide an empirical basis for FDI and exports-promoting policies.