Relationships between economic growth, foreign direct investment, and poverty in Africa
In the past years, Africa has experienced fast economic growth, unimproved business environment, low foreign direct investment inflows, and continuous high poverty rate. In fact, foreign direct investment (FDI) inflows in Africa are the lowest compared to other region's FDI inflows. Moreove...
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| Format: | Thesis |
| Language: | English |
| Published: |
2017
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| Subjects: | |
| Online Access: | http://psasir.upm.edu.my/id/eprint/70823/1/FEP%202017%2012%20IR.pdf |
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| Summary: | In the past years, Africa has experienced fast economic growth,
unimproved business environment, low foreign direct investment
inflows, and continuous high poverty rate. In fact, foreign direct
investment (FDI) inflows in Africa are the lowest compared to other
region's FDI inflows. Moreover, African countries are ranked at the
bottom of the country-ranking list in term of quality of business
environment. Therefore, the objectives of this study are to investigate
the impact of foreign direct investment on economic growth in Africa,
to estimate the impact of business environment on foreign direct
investment, and to examine the determinants of poverty in the
continent. The study covers the period from 2000 to 2014 in 50 African
countries. The study utilizes panel annual data from World Bank, Mo
Ibrahim Foundation, and United Nation Development Program. The
study uses system Dynamic Generalized Method of Moments estimator
(DGMM) because it takes control of endogeneity, and country specific
effects problems that may arise in panel data estimations. The study
found that foreign direct investment and business environment in
addition to human capital, financial development, and political
stability significantly contribute to economic growth of African
countries. In addition, the results of the study reveal that business
environment, economic growth, financial development, and
institutions quality have important role in attracting the FDI inflows
into African countries. Moreover, the study found that an improvement
in economic growth, foreign aid, trade, and political stability
significantly reduce poverty rate in the region. Overall results provide
empirical evidence for African policy-makers to introduce policies that
aim to attract more FDI inflows to enhance the economic growth of the
region. Also, the results delivers empirical evidences for policy-makers
to improve business environment that attracts more FDI inflows which generates economic growth. It also provides strong evidence for policymakers
to improve financial services to facilitate trade and doing
business in the continent. In addition, this study provides better
foundation for African policy-makers to manage and introduce effective
policies that would help in generating more economic growth and
reduce poverty rate in Africa. Finally, this study has achieved the
objectives of the thesis. |
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