Does Foreign Direct Investment Promote Exports? Evidence from African Countries

This paper empirically examines the effect of foreign direct investment (FDI) inflows on exports in Africa. Using the system-generalised method of moments estimator for linear dynamic panel data on a sample of 53 African countries and five-year periods from 1970 to 2009, the paper finds that higher FDI inflows are positively and significantly linked with higher exports of goods and services. A large part of the FDI effect is driven by its spillover effects on exports. The paper also finds the lagged value of exports, a competitive currency, as well as increases in domestic investment and physical infrastructure, to be factors stimulating African exports.