An empirical analysis of growth and FDI in the sub-Saharan African countries

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Ansah, JO, 2022. An empirical analysis of growth and FDI in the sub-Saharan African countries. PhD, Nottingham Trent University.

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Abstract

The positive role of Foreign Direct Investment on host country's economic growth is well established. FDI provides a vehicle for technological transfer by providing resources to finance investment projects. However, FDI as a Financial asset is sensitive to unfavourable business environment and it is subject to sudden reversal if the host country's investment climate is inherently unfriendly. The poor performance of inward FDI in Africa is troubling. The state of the African business environment plays a significant role in determining the patterns of FDI flows in the region. This dissertation consists of Four empirical essays which seeks to examine the determinants of FDI and its impact on SSA countries.

The first empirical chapter studies the mediating role of financial development in the FDI growth nexus. The novelty of this paper is that unlike previous studies where a single variable is used to measure financial development, this study develops an aggregate measure of financial development indicator. This indicator is developed from several individual financial development measures normally used in the literature. To mitigate the impact of endogeneity, I use the Generalized Methods of Moments estimator. The results reveal that there is a financial development threshold point. Countries only benefit from FDI when their financial sector develops above this threshold point. However, Finance plays a positive role in the FDI growth nexus in Africa's high-income countries.

The second empirical chapter uses fixed effect panel quantile regression model to investigate the impact of FDI on economic growth. The results are summarised as follows: First, the impact of FDI on growth is heterogeneous across the conditional distribution of income; and so FDI plays a significant impact on growth at the higher quantiles of income. The significant impact is only observed from the 75th quantile upwards. Financial sector development only mediates FDI led growth at the higher quantile.

The third empirical chapter studies the impact of Sub-Sahara Africa's Business environment on FDI flow into the region. The chapter uses a panel dataset on 43 African countries over 2003-2019. Using the world Bank ease of Doing Business and the Heritage foundation Business Freedom index, the Least square Dummy variable and the Poisson Pseudo Maximum likelihood estimation methods suggest FDI flows are sensitive to the host country's investment condition. FDI flows more to country where the Ease of doing business is high. The results are robust when individual measures of Ease of doing business in used.

The Fourth Empirical chapter studies the determinants of Chinese investment in Africa. By using FDI data at a country and sectorial level, the study reveals that the determinants of Chinese investment vary according to sector the investment is taking place. However, the role of natural resource endowment in attracting Chinese investment to Africa is ubiquitous in the analysis.

Item Type:	Thesis
Creators:	Ansah, J.O.
Date:	October 2022
Divisions:	Schools > Nottingham Business School
Record created by:	Linda Sullivan
Date Added:	21 Jun 2023 08:20
Last Modified:	21 Jun 2023 08:20
URI:	https://irep.ntu.ac.uk/id/eprint/49230