Foreign Direct Investment and Export Competitiveness in Africa: Investigating the Channels (original) (raw)
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Appl Econ, 2010
The disappointing economic performance of Sub-Saharan African (SSA) economies in the late 1980s prompted economic-wide policy reforms in the early 1990s. The primary objectives of these institutional and structural changes were to promote trade and export activities, enhance foreign direct investment (FDI) inflows, and ease foreign access to SSA markets particularly for large multinational enterprises associated with more advanced technologies and better managerial and organizational practice. This study focuses on the effect of exports, FDI and imports on economic growth in SSA, using the new autoregressive distributed lag (ARDL) approach and Pedroni estimation procedure which also allows for heterogeneity across individual countries. It is found that exports and FDI have significant impact on economic growth. Granger-type causality tests show the interrelatedness of exports, FDI, imports and income variables. The results also provide some evidence of existence of a two-stage causal chain of exports, imports and income. The paper calls for more market-oriented policy changes in SSA countries to create a liberal environment for foreign trade and FDI.
The role of exports, FDI and imports in development: evidence from Sub-Saharan African countries
Applied Economics, 2011
The disappointing economic performance of Sub-Saharan African (SSA) economies in the late 1980s prompted economic-wide policy reforms in the early 1990s. The primary objectives of these institutional and structural changes were to promote trade and export activities, enhance foreign direct investment (FDI) inflows, and ease foreign access to SSA markets particularly for large multinational enterprises associated with more advanced technologies and better managerial and organizational practice. This study focuses on the effect of exports, FDI and imports on economic growth in SSA, using the new autoregressive distributed lag (ARDL) approach and Pedroni estimation procedure which also allows for heterogeneity across individual countries. It is found that exports and FDI have significant impact on economic growth. Granger-type causality tests show the interrelatedness of exports, FDI, imports and income variables. The results also provide some evidence of existence of a two-stage causal chain of exports, imports and income. The paper calls for more market-oriented policy changes in SSA countries to create a liberal environment for foreign trade and FDI.
Exports and economic growth: The African case
World Development, 1990
Previous studies have found that export growth favorably affects the rate of economic growth in less developed countries (LDCs). This paper examines the extent to which this hypothesis holds true for African countries as a subgroup, especially since export contents and transmission mechanisms may differ between African and other LDCs. GDP growth of 28 African LDCs is analyzed using a pooled cross-sectional cum time-series estimation of 196&70 and 197680 average annual growth rates. Based upon the usual augmented production function specification that includes labor, capital formation, and exports, export growth is observed to exert a positive and significant impact on economic growth. While this export effect is somewhat smaller than that for non-African LDCs, the difference is not statistically significant.
This study investigates the export-economic growth relationship for Namibia. The study was motivated by the contradicting results in the literature of the export and economic growth relationship despite the wide theoretical consensus among researchers that "export expansion is the engine of economic growth." Namibia was chosen as a case study since the Namibian government also put some weights on export promotion as one of its growth strategies. The study models the relationship through the augmented neoclassical production function framework. The Johansen co-integration test, the vector-error correction model (VECM) and the Granger causality tests were employed to test for the nature of the relationship. The Granger causality test indicates a uni-directional causation from export to economic growth. This allows us to confirm the validity of the export-led growth hypothesis in the case of Namibia. The findings also suggest that economic growth is dependent on export performance in a way. Therefore Namibia can enhance its economic growth by improving upon the competiveness of its exported items. ______________________________________________________________________________
Towards Export-Led Growth in the West Africa Sub Region Economies
Archives of Business Research – Vol. 9, No. 10, 2021
The policy of import substitution dominated developing economies especially Sub-Sharan African countries up till 1970. The focus later shifted to pursuing growth through increased export. Recently, countries of the West Africa Sub-region are clamoring for a revisit of growth through import substitution policies. This study therefore delved into the question of whether ECOWAS countries should go for import substitution growth strategy, or to develop strategy that promotes exportled growth, following the law of comparative advantage or a considerable mix of the two strategies. Using an export-augmented neoclassical production function, the study tested how relevant is the Export-led Growth Hypothesis for the ECOWAS subregion over the period 1980-2014. Evidence does not offer a strong support for the Hypothesis in the short run but a strong evidence for improved capital stock and labor causing growth. However, long-run results suggest a significant relationship between export and growth but currently negative. A likely explanation of this negativity is that although exports, in the West African sub-regions has the tendency of increasing growth in the long run along with other factors of production, the present conditions of export, especially manufactured and agricultural exports, is experiencing a kind of "Import surge". That is the import content of exports is high and the local content is low, thus reducing the spillover or multiplier effects. This was confirmed by the strong bilateral causality between export and import discovered in this study. A policy mix of import substitution and export promotion strategies was recommended for countries in this sub-region. Policies that will promote technological innovation in manufacturing and linkages with local suppliers alongside incentives to produce towards export are imperative. Production towards export should be focused on manufactured and agricultural products where each country has the highest comparative advantage so as to reduce the import content of the export.
A further examination of the export-led growth hypothesis
Empirical Economics, 2013
This paper challenges the common view that exports generally contribute more to GDP growth than a pure change in export volume, as the export-led growth hypothesis predicts. Applying panel cointegration techniques to a production function with non-export GDP as the dependent variable, we find for a sample of 45 developing countries that: (i) exports have a positive short-run effect on non-export GDP and vice versa (short-run bidirectional causality), (ii) the long-run effect of exports on nonexport output, however, is negative on average, but (iii) there are large differences in the long-run effect of exports on non-export GDP across countries. Cross-sectional regressions indicate that these cross-country differences in the long-run effect of exports on non-export GDP are significantly negatively related to cross-country differences in primary export dependence and business and labor market regulation. In contrast, there is no significant association between the growth effect of exports and the capacity of a country to absorb new knowledge.
The Determinants of Intra-Africa Export Performance in Selected African Countries
Economic Insights – Trends and Challenges, 2021
Developing countries in the factor-driven stage of development are usually bedevilled by domestic supply-side constraints which hinder translation of their comparative advantages to development. This study examines the domestic supply-side determinants to intra-Africa export performance in selected African countries. The study analysed 1994 to 2019 panel data of the biggest economies in each of the five African sub-regions, using pooled mean group (PMG) technique. The result from the study revealed capital formation, institutional quality, macroeconomic stability, technology adoption and infrastructure as significant long-run determinants of intra-Africa export performance while size of labour force was found to be insignificant long-run determinant of intra-Africa export share. All short-run coefficients of explanatory variables except one period lag of infrastructure and capital formation were insignificant. The coefficient of error correction term was negative and statistically s...
RePEc: Research Papers in Economics, 2021
This study examines the dynamic causal relationship between exports and economic growth in sub-Saharan African (SSA) countries during the period 1980-2017. The study also examines whether the causality between these two macroeconomic variables depends on the countries' level of income. For this purpose, the full sample of SSA countries is disaggregated into two subsetsone comprising of low-income countries and the other consisting of middle-income countries. In order to address the omission-of-variable bias, which has been reported in some of the previous studies, the study uses a multivariate panel Granger causality model to examine this linkage. Specifically, the study incorporates external debt as an intermittent variable in a bivariate setting between exports and economic growth, thereby creating a dynamic multivariate Granger-causality model. Although the study found the existence of a long-run relationship between exports and economic growth, the study failed to find any export-led growth response in both low-income and middle-income countries. Instead, the study found evidence of a bi-directional causality and a neutrality response in middle-income and lowincome countries, respectively. The study concludes that the argument that exports always lead to economic growth may have been oversold to many SSA countries. The study, therefore, cautions low-income SSA countries against over-relying on an export-led growth strategy to achieve a sustained growth path. Instead, they should consider pursuing domestic demand-led growth strategies alongside their export promotion strategies to expand the real sector of their economies
The Export-Led Growth Hypothesis: New Evidence and Implications
BOOK, 2015
Previous studies on economic growth have shown that countries that relied on exports to propel their economies have been successful in achieving robust economic growth. This study considers Botswana’s mineral exports production from 2003Q1 to 2012Q4 and relates each export commodity with the GDP. This study applies the Johansen cointegration test and the Granger causality test to determine the applicability of the export-led growth hypothesis for the Botswana economy. The cointegration test shows that there is long run comovement between GDP and four of Botswana’s mineral exports namely: matte; diamonds; copper; nickel and soda ash. In addition, the Granger causality test shows that Botswana’s economy propels exports production. From these results, the study nullifies the export-led growth hypothesis and postulates that the Botswana economy rather follows the growth-driven exports hypothesis (GDE). The study further postulates recommendations and also potential areas of research.
The Impact of FDI Inflows, Exports and Domestic Investment on Economic Growth in Africa
Journal of Economics and Behavioral Studies, 2018
The topic regarding the impact of foreign direct investment net inflows, exports and domestic investment on economic growth has resulted in mixed research findings across the globe. Literature related to the above variables in five selected African countries drawn from the five sub-regions is critically reviewed in this article. Furthermore, an econometric analysis of these variables is done to ascertain their impact on economic growth. The findings are compared to previous findings in other studies. The researcher found similar results in some variables when compared to previous researches in other countries. The study found that the independent statistical variables significantly predicted gross domestic product, with F (3, 63) = 5.84, P > F 0.0014, R 2 = 0.2176, adjusted R 2 = 0.1804 and root mean squared error (RMSE) = 0.54976. The independent variables added significantly to the prediction of p < 0.05. The researcher challenges the notion that the impact of foreign direct investment net inflows, exports and domestic investment on economic growth should always be positive and significant. This study provides a refreshed appreciation of the relationship between foreign direct investment net inflows, exports, domestic investment and economic growth in light of rapid socioeconomic changes in the sampled countries. The article also proposes some critical considerations regarding this relationship.