International Journal of Social Science & Economic Research
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Title:
FOREIGN DIRECT INVESTMENT, PRIVATE DOMESTIC INVESTMENT AND ECONOMIC GROWTH IN AFRICA: THEORY AND EVIDENCE

Authors:
John Mutenyo , John Bosco Nnyanzi and Maya Denis Makika

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John Mutenyo1 , John Bosco Nnyanzi2 and Maya Denis Makika3
1,2. Senior Lecturer, School of Economics, Makerere University Kampala Uganda.
3. Research Associate, Economic Policy Research Centre, Kampala, Uganda.

MLA 8
Mutenyo, John, et al. "FOREIGN DIRECT INVESTMENT, PRIVATE DOMESTIC INVESTMENT AND ECONOMIC GROWTH IN AFRICA: THEORY AND EVIDENCE." Int. j. of Social Science and Economic Research, vol. 7, no. 5, May 2022, pp. 1278-1300, doi.org/10.46609/IJSSER.2022.v07i05.009. Accessed May 2022.
APA 6
Mutenyo, J., Nnyanzi, J., & Makika, M. (2022, May). FOREIGN DIRECT INVESTMENT, PRIVATE DOMESTIC INVESTMENT AND ECONOMIC GROWTH IN AFRICA: THEORY AND EVIDENCE. Int. j. of Social Science and Economic Research, 7(5), 1278-1300. Retrieved from doi.org/10.46609/IJSSER.2022.v07i05.009
Chicago
Mutenyo, John, John Bosco Nnyanzi, and Maya Denis Makika. "FOREIGN DIRECT INVESTMENT, PRIVATE DOMESTIC INVESTMENT AND ECONOMIC GROWTH IN AFRICA: THEORY AND EVIDENCE." Int. j. of Social Science and Economic Research 7, no. 5 (May 2022), 1278-1300. Accessed May, 2022. doi.org/10.46609/IJSSER.2022.v07i05.009.

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ABSTRACT:
This paper assesses the impacts of foreign direct investment (FDI) and domestic private investment on economic growth in Sub Saharan African countries. This investigation arises from the preferential treatment accorded to foreign firms vis avis domestic firms in African countries with the assumption that foreign firms are more growth stimulating than their domestic counterparts. The empirical results are motivated by an endogenous growth model in which FDI is considered as one of the major determinants of growth. Domestic private investment is also introduced in the model in order to determine the form of investment that is more growth stimulating. Analytically, the paper adopts a dynamic panel model, hence uses the GMM estimator to obtain consistent and efficient estimates of the impact of FDI on economic growth. We find that FDI is negative and significantly influences economic growth in Sub-Sahara African countries. PDI has a positive relationship with economic growth thus PDI is more growth stimulating than FDI in SSA. The study recommends that SSA countries should strengthen regional integration in order to attract the desired FDI for desired economic outcomes. Other factors significantly influencing growth are government spending, initial GDP per capita, human capita development, financial development, trade openness.

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