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Openness, Investment and Growth in Sub-Saharan Africa

Openness, Investment and Growth in Sub-Saharan Africa This paper revisits the determinants of economic growth in Sub-Saharan Africa by looking at conditional and unconditional convergence, and by focusing on the growth incidence of globalisation, domestic investment (DI), and foreign direct investment (FDI). We use annual time-series to estimate dynamic panel data models that exploit all sample information (i.e., we do not only use 5-year averages as is standard in the literature). We find the rate of conditional convergence to be around 4%, and the growth impact of FDI and DI to be greater the greater is the change in the degree of economic openness. We also find a net crowding out effect between both types of capital so that larger amounts of FDI reduce the impact of DI on economic growth (and vice versa). These results are obtained through the estimation of multiplicative interaction models which allows us to evaluate the interactions between changes in openness, DI and the net flows of FDI. This constitutes a novelty in the appraisal of the globalisation and investment impact on economic growth. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of African Economies Oxford University Press

Openness, Investment and Growth in Sub-Saharan Africa

Journal of African Economies , Volume 23 (2) – Mar 2, 2014

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References (31)

Publisher
Oxford University Press
Copyright
© The author 2014. Published by Oxford University Press on behalf of the Centre for the Study of African Economies. All rights reserved. For permissions, please email: journals.permissions@oup.com
Subject
Articles
ISSN
0963-8024
eISSN
1464-3723
DOI
10.1093/jae/ejt027
Publisher site
See Article on Publisher Site

Abstract

This paper revisits the determinants of economic growth in Sub-Saharan Africa by looking at conditional and unconditional convergence, and by focusing on the growth incidence of globalisation, domestic investment (DI), and foreign direct investment (FDI). We use annual time-series to estimate dynamic panel data models that exploit all sample information (i.e., we do not only use 5-year averages as is standard in the literature). We find the rate of conditional convergence to be around 4%, and the growth impact of FDI and DI to be greater the greater is the change in the degree of economic openness. We also find a net crowding out effect between both types of capital so that larger amounts of FDI reduce the impact of DI on economic growth (and vice versa). These results are obtained through the estimation of multiplicative interaction models which allows us to evaluate the interactions between changes in openness, DI and the net flows of FDI. This constitutes a novelty in the appraisal of the globalisation and investment impact on economic growth.

Journal

Journal of African EconomiesOxford University Press

Published: Mar 2, 2014

Keywords: JEL classification O55 O47 F43 E22

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